Foundations of Planning Planning A primary managerial activity that involves: Defining the organizations goals Establishing an overall achieving

hieving those goals strategy for

'trategic ,oals Are related to the performance of the firm relative to factors in its e+ternal environment -e.g., competitors0.

'tated ,oals vers!s %eal ,oals 1roadly worded official statements of the organization -intended for p!blic cons!mption0 that may be irrelevant to its real goals -what act!ally goes on in the organization0.

Developing plans for organizational work activities. Types of planning Informal: not written down, short term foc!s" specific to an organizational !nit. #ormal: written, specific, and long term foc!s, involves shared goals for the organization. Purposes of Planning

$rovides direction %ed!ces !ncertainty &inimizes waste and red!ndancy 'ets the standards for controlling The Relationship And Performance Between Planning )ypes of $lans Types of Plans 'trategic $lans Apply to the entire organization. Establish goals. the organizations overall

#ormal planning is associated with: (igher profits and ret!rns on assets. $ositive financial res!lts. )he *!ality of planning and implementation affects performance more than the e+tent of planning. )he e+ternal environment can red!ce the impact of planning on performance, #ormal planning m!st be !sed for several years before planning begins to affect performance. Elements of Planning

'eek to position the organization in terms of its environment. 2over e+tended periods of time. .perational $lans 'pecify the details of how the overall goals are to be achieved. 2over short time period. 3ong )erm $lans $lans with time beyond three years 'hort )erm $lans $lans with time frames on one year or less 'pecific $lans $lans that are clearly defined and leave no room for interpretation Directional $lans #le+ible plans that set o!t general g!idelines provide foc!s, yet allow discretion in implementation. frames e+tending

,oals -also .b/ectives0 Desired o!tcomes for individ!als, gro!ps, or entire organizations $rovide direction and performance criteria eval!ation

$lans Doc!ments that o!tline how goals are to be accomplished Describe how reso!rces are to be allocated and establish activity sched!les

Types of Goals #inancial ,oals Are related to the e+pected internal financial performance of the organization.

1. The organizations overall objectives and strategies are formulated. 2. Major objectives are allocated among divisional and departmental units. 3. Unit managers collaboratively specific objectives for their units their managers. 'pecific vers!s Directional $lans 'ingle 4se $lan A one time plan specifically designed to meet the need of a !ni*!e sit!ation. 'tanding $lans .ngoing plans that provide g!idance for activities performed repeatedly. Traditional Goal Setting 1road goals are set at the top of the organization. ,oals are then broken into s!b goals for each organizational level. Ass!mes that top management knows best beca!se they can see the 5big pict!re.6 ,oals are intended to direct, g!ide, and constrain from above. ,oals lose clarity and foc!s as lower level managers attempt to interpret and define the goals for their areas of responsibility. &aintaining the (ierarchy of ,oals -&eans7Ends 2hain0 set ith

!. "pecific objectives are collaboratively set ith all department members. #. $ction plans% defining ho objectives are to be achieved% are specified and agreed upon by managers and employees. &. The action plans are implemented. '. (rogress to ard objectives is periodically revie ed% and feedbac) is provided. *. "uccessful achievement of objectives is reinforced by performance+based re ards %eason for &1. '!ccess )op management commitment and involvement $otential $roblems with &1. $rograms :ot as effective in dynamic environments that re*!ire constant resetting of goals. .veremphasis on individ!al accomplishment may create problems with teamwork. Allowing the &1. program to become an ann!al paperwork sh!ffle. Planning in Organi%ations the $ierarchy of

)he integrated network of goals that res!lts from establishing a clearly defined hierarchy of organizational goals. Achievement of lower level goals is the means by which to reach higher level goals -ends0. Management By Ob ecti!es "MBO# 'pecific performance goals are /ointly determined by employees and managers. $rogress toward accomplishing goals is periodically reviewed. %ewards are allocated on the basis of progress towards the goals. 8ey elements of &1.: ,oal specificity, participative decision making, an e+plicit performance9eval!ation period, feedback 'teps in a )ypical &1. $rogram

Strategic management and Entrepreneurship Strategy

A comprehensive plan of action that sets critical direction for an organization and g!ides the allocation of its reso!rces. Strategic Management )he process of form!lating and implementing strategies. &i!e Strategic Management Tas's Identify organizational mission and ob/ectives. ;hat are we<.what do we want to be<< Assess c!rrent performance vis = vis mission and ob/ectives. (ow are we doing<... 2reate strategic plans to accomplish p!rpose and ob/ectives. (ow can we get where we want to be<.. Implement the strategic plans. (as everything been done that needs to be done<. Eval!ate res!lts" change strategic plans and9or implementation processes as necessary. Are things working o!t as planned, and what can be improved !pon<... The Strategic Management Process Strategy &ormulation Analysis of the Mission -$!rpose0 Analysis of (alues -2orp 2!lt!re0 Analysis of the Organi%ation -'>;0 Analysis of the En!ironment -.>)0

It defines the character of an organization to both itself and its e+ternal stakeholders. Analysis of Ob ecti!es Operating Ob ecti!es Direct activities toward key and specific res!lts. 'horter term targets against which act!al performance res!lts can be meas!red as indicators of progress and contin!o!s improvement. Analysis of the Organi%ation "S,OT# -nternal Assessment of the Organi%ation Strengths. &fging Efficiency 'killed ;orkforce ,ood &arket 'hare 'trong #inancing '!perior %ep!tation ,ea'nesses. .!tdated #acilities Inade*!ate %>D .bsolete )ech ;eak &anagement $ast $lanning #ail!res E/ternal Assessment of the En!ironment Opportunities. :ew &arkets 'trong Economy ;eak %ivals Emerging )ech. ,rowth of &arket Threats. :ew 2ompetition 'hortage of %eso!rces 2hanging &kt )aste :ew %eg!lations '!bstit!te $rod!cts +e!els Of Strategy )orporate 'ets the overall strategic direction. Business 'ets the strategic direction for a single division or strategic b!siness !nit -'140. &unctional 'ets f!nctional directions for s!pporting b!siness and corporate strategies. A strategy that g!ides activities within specific f!nctional areas. Types of Strategies 01 Growth Strategy 'eeking greater size and the e+pansion of c!rrent operations. )his ob/ective can be p!rs!ed in a n!mber of different ways thro!gh two basic strategies: E+: )oncentration and 2i!ersification 31 Retrenchment 'ometimes called defensive strategies, involves decisions to red!ce operations and c!t

Analysis of the Mission 4s!ally e+pressed in the form of a &ission 'tatement in which it identifies the organizations official ob/ectives, and it defines the Domain in which the organization intends to operate s!ch as: the )ustomer it intends to serve. the Products and*or Ser!ices to be provided. the +ocation in which it intends to operate. the Philosophy that will g!ide the employees. Strategic )onstituencies Analysis ;hat is the organizations commitment to its stakeholders: -Employees, 'tockholders, '!ppliers, 2reditors, 2omm!nities0 Analysis of )ore (alues ?al!es )he broad based beliefs abo!t what is or is not appropriate. 2orporate 2!lt!re )he predominate val!e system for the organization. )hro!gh corporate c!lt!res, the val!es of managers and other individ!als are shaped and pointed in common directions.

back in order to gain efficiencies and improve performance. )here are three basic approaches: E+: )!rnaro!nd Divestit!re 3i*!idation 41 Stability &aintains the present co!rse of action witho!t commitment to any ma/or operating changes. )ypically p!rs!ed when an organization is doing well in a receptive environment, when low risk is important <.. and9or when time is needed to consolidate strengths <<. 51 )ombination Strategies 'im!ltaneo!sly employs more than one of the other strategies. )his often reflects different strategic approaches among s!bsystems. Strategy &ormulation Models @. $ortfolio $lanning 'eeks the best mi+ of investments among alternative b!siness opport!nities. It is most !sef!l for addressing corporate level strategy in m!lti b!siness or m!ltiprod!ct sit!ations. 31 The B)G Matri/ A $ortfolio planning approach offered by the 1oston 2ons!lting ,ro!p. It ties strategy form!lation to an analysis of b!siness opport!nities according to &arket ,rowth %ate and &arket 'hare. It ties strategy form!lation to fo!r possible b!siness states: 'tars (igh share9high growth 2ash 2ows (igh share9low growth A!estion &arks 3ow share9high growth Dogs 3ow share9low growth 41 Porter6s )ompetiti!e Strategies )his approach begins with an analysis of an organizationBs competitive environment. (e identifies five strategic forces affecting ind!stry competition: ,ustomers "uppliers -e .ntrants "ubstitute (roducts /ndustry :e+t $orter identifies three generic strategies that organizations may p!rs!e to gain strategic advantage: $rod!ct Differentiation 2ost 3eadership #oc!s 51 The Adapti!e Model .rganizations sho!ld p!rs!e prod!ct9market strategies that are congr!ent with the nat!re of their e+ternal environments. $rospector 'trategies )aking risk, seeking opport!nities, innovation, and growth. Defender 'trategy Avoiding change, seeking stability and perhaps retrenchment. Analyzer 'trategy &aintaining stability, while e+ploring limited innovation. %eactor 'trategy %esponding to events, b!t witho!t a g!iding strategy.

71 Product +ife )ycles A series of stages a prod!ct or service goes thro!gh in the life of it marketability. Introd!ction ,rowth &at!rity Decline '!ggests that different b!siness strategies sho!ld be !sed to s!pport prod!cts in different stages of their life. Strategy -mplementation The -ncremental8Emergent (iew @. :ot all strategies are clearly form!lated at one point in time and then implemented step by step. C. )hey take shape, change, and develop over time as modest ad/!stments to past patterns. D. It is called 3ogical Incrementalism in which incremental changes in strategy occ!r as managers learn from e+perience. E. 'trategic $lanning $itfalls &ailures of Substance %eflects a lack of attention to the ma/or strategic planning elements. &ailure of Process %eflects poor handling of the ways in which the vario!s aspects of strategic planning were accomplished. a. Ins!fficient $articipation Error b. ,oal Displacement The 9ature of Entrepreneurship A term !sed to describe risk taking behavior that res!lts in the creation of new opport!nities for individ!als and9or organizations. Typical )haracteristics of Entrepreneurs Internal 3oc!s of 2ontrol (igh :eed for Achievement )olerance for Ambig!ity 'elf 2onfidence Action .riented Entrepreneurs 1!sinesses depend on entreprene!rial managers willing to ass!me risk and enco!rage the creativity and innovation so important to contin!ed s!ccess. Intraprene!rship 'k!nk works Planning Tools and Techniques Assessing the En!ironment Environmental 'canning )he screening of large amo!nts of information to anticipate and interpret change in the environment. )ompetitor -ntelligence

 )he process of gathering information abo!t competitorsF who they are" what they are doing Is not spying b!t rather caref!l attention to readily accessible information from employees, c!stomers, s!ppliers, the Internet, and competitors themselves. &ay involve reverse engineering of competing prod!cts to discover technical innovations. ,lobal 'canning 'creening a broad scope of information on global forces that might affect the organization. (as val!e to firms with significant global interests. Draws information from so!rces that provide global perspectives on world wide iss!es and opport!nities. #orecasting )he part of organizational planning that involves creating predictions of o!tcomes based on information gathered by environmental scanning. #acilitates managerial decision making. Is most acc!rate in stable environments.

Exhibit 92 Ste s in !ench"ar#ing

Source: Based on Y.K. Shetty, Aiming High: Competitive Benchmarking or S!perior "er ormance,# Long Range Planning. $e%r!ary 1&&', p. (2.

2007 Prentice Hall, Inc. All rights reserved.

911

1. 2.

&orecasting Techni:ues A!antitative )ime series analysis %egression models Econometric models Economic indicators '!bstit!tion effect A!alitative G!ry of opinion 'ales force composition 2!stomer eval!ation

Ma'ing &orecasting More Effecti!e @. 4se simple forecasting methods. C. 2ompare each forecast with its corresponding 5no change6 forecast. D. Dont rely on a single forecasting method. E. Dont ass!me that the t!rning points in a trend can be acc!rately identified. H. 'horten the time period covered by a forecast. I. %emember that forecasting is a developed managerial skill that s!pports decision making. Benchmar'ing )he search for the best practices among competitors and non competitors that lead to their s!perior performance. 1y analyzing and copying these practices, firms can improve their performance.

Allocating Resources )ypes of %eso!rces )he assets of the organization &inancial; debt, e*!ity, and retained earnings Physical; b!ildings, e*!ipment, and raw materials $uman; e+periences, skills, knowledge, and competencies -ntangible; brand names, patents, rep!tation, trademarks, copyrights, and databases Allocating Resources; Budgeting 1!dgets Are n!merical plans for allocating reso!rces -e.g., reven!es, e+penses, and capital e+pendit!res0. Are !sed to improve time, space, and !se of material reso!rces. Are the most commonly !sed and most widely applicable planning techni*!e for organizations. Allocating Resources; Scheduling 'ched!les $lans that allocate reso!rces by detailing what activities have to be done, the order in which they are to be completed, who is to do each, and when they are to be completed. %epresent the coordination of vario!s activities. Allocating Resources; )harting ,antt 2hart A bar graph with time on the horizontal a+is and activities to be accomplished on the vertical a+is. 'hows the e+pected and act!al progress of vario!s tasks. 3oad 2hart A modified ,antt chart that lists entire departments or specific reso!rces on the vertical a+is. Allows managers to plan and control capacity !tilization. Allocating Resources; Analysis $rogram Eval!ation and %eview )echni*!e -$E%)0

A flow chart diagram that depicts the se*!ence of activities needed to complete a pro/ect and the time or costs associated with each activity. Events: endpoints for completion. Activities: time re*!ired for each activity. 'lack time: the time that a completed activity waits for another activity to finish so that the ne+t activity, which depends on the completion of both activities, can start. 2ritical path: the path -ordering0 of activities that allows all tasks to be completed with the least slack time. Steps in 2e!eloping a PERT 9etwor' @. Identify every significant activity that m!st be achieved for a pro/ect to be completed. C. Determine the order in which these events m!st be completed. D. Diagram the flow of activities from start to finish, identifying each activity and its relationship to all other activities. E. 2omp!te a time estimate for completing each activity. H. 4sing the network diagram that contains time estimates for each activity, determine a sched!le for the start and finish dates of each activity and for the entire pro/ect. I. 1reakeven Analysis Is !sed to determine the point at which all fi+ed costs have been recovered and profitability begins. @. #i+ed cost -#20 C. ?ariable costs -?20 D. )otal #i+ed 2osts -)#20 E. $rice -$0 )he 1reak even #orm!la:

A consistent view of what the f!t!re is likely to be. 'cenario $lanning An attempt not try to predict the f!t!re b!t to red!ce !ncertainty by playing o!t potential sit!ations !nder different specified conditions. 2ontingency $lanning Developing scenarios that allow managers determine in advance what their actions sho!ld be sho!ld a considered event act!ally occ!r.

Preparing for <ne/pected E!ents Identify potential !ne+pected events. Determine if any of these events wo!ld have early indicators. 'et !p an information gathering system to identify early indicators. (ave appropriate responses -plans0 in place if these !ne+pected events occ!r. &undamentals of organi%ing Organi%ing 8-ntroduction Organi%ing is the f!nction of management which follows planning. It is a f!nction in which the synchronization and combination of h!man, physical and financial reso!rces takes place. All the three reso!rces are important to get res!lts. )herefore, organizational f!nction helps in achievement of res!lts which in fact is important for the f!nctioning of a concern. According to ,hester 0arnard, 5.rganizing is a f!nction by which the concern is able to define the role positions, the /obs related and the co ordination between a!thority and responsibility. (ence, a manager always has to organize in order to get res!lts. .rganizing is the process of identifying and gro!ping the work to be performed, defining and delegating a!thority, and establishing relationships to enable people to work together to achieve the organizationBs ob/ectives. In essence, organizing involves the gro!ping of activities and reso!rces in a logical fashion.

Breakeven :

Total Fixed Costs Unit Price - Unit Variable Costs

J. 3inear $rogramming A techni*!e that seeks to solve reso!rce allocation problems !sing the proportional relationships between two variables. )ontemporary Planning Techni:ues $ro/ect A one time only set of activities that has a definite beginning and ending point time. $ro/ect &anagement )he task of getting a pro/ects activities done on time, within b!dget, and according to specifications. Define pro/ect goals Identify all re*!ired activities, materials, and labor Determine the se*!ence of completion 'cenario

The structure and process of organizing 3ooking at organizing as a process re*!ires that several f!ndamentals to be considered. In the first place str!ct!re m!st reflect ob/ectives and plans beca!se activities derive from them .in the second place, it m!st reflect the a!thority available to an enterprises management .A!thority in a given organization is a socially determined right to e+ercise direction, it is s!b/ect to change. In the third place, an organization str!ct!re, like any plan, m!st reflect its environment .G!st as the premises of a plan may be economic,

technological, political, social or ethical, so may be those of an organization str!ct!re. It m!st be designed to work, to permit contrib!tions by members of a gro!p, and to help people can gain ob/ectives efficiently in changing f!t!re .In this sense, a workable organization str!ct!re can never be static. )here is no single organization str!ct!re that works best in all kinds of sit!ations. An effective organization str!ct!re depends on the sit!ation. In the fo!rth place, since the organization is staffed with people, the gro!ping of activities and the a!thority relationships of an organization str!ct!re m!st take into acco!nt peoples limitations and c!stoms. )his is not to say that the str!ct!re m!st be designed aro!nd individ!als instead of aro!nd goals and accompanying activities. 1!t the consideration is the kinds of people who are to staff it. )he organizing process consists of the following steps Re!iew plans and ob ecti!es1 .b/ectives are the specific activities that m!st be completed to achieve goals. $lans shape the activities needed to reach those goals. &anagers m!st e+amine plans initially and contin!e to do so as plans change and new goals are developed. 2etermine the wor' acti!ities necessary to accomplish ob ecti!es1 Altho!gh this task may seem overwhelming to some managers, it doesnBt need to be. )larifies authority .rganizational str!ct!re helps in clarifying the role positions to every manager -stat!s *!o0. )his can be done by clarifying the powers to every manager and the way he has to e+ercise those powers sho!ld be clarified so that mis!se of powers does not take place. ;ell defined /obs and responsibilities attached helps in bringing efficiency into managers working. )his helps in increasing prod!ctivity. )o8ordination .rganization is a means of creating co ordination among different departments of the enterprise. It creates clear c!t relationships among positions and ens!re m!t!al co operation among individ!als. (armony of work is bro!ght by higher level managers e+ercising their a!thority over interconnected activities of lower level manager. A!thority responsibility relationships can be fr!itf!l only when there is a formal relationship between the two. #or smooth r!nning of an organization, the co ordination between a!thority responsibility is very important. )here sho!ld be co ordination between different relationships. 2larity sho!ld be made for having an !ltimate responsibility attached to every a!thority. )here is a saying, 5$uthority

&anagers simply list and analyze all the tasks that need to be accomplished in order to reach organizational goals. )lassify and group the necessary wor' acti!ities into manageable units1 A manager can gro!p activities based on fo!r models of departmentalization: f!nctional, geographical, prod!ct, and c!stomer. Assign acti!ities and delegate authority1 &anagers assign the defined work activities to specific individ!als. Also, they give each individ!al the a!thority -right0 to carry o!t the assigned tasks. 2esign a hierarchy of relationships1 A manager sho!ld determine the vertical -decision making0 and horizontal -coordinating0 relationships of the organization as a whole. :e+t, !sing the organizational chart, a manager sho!ld diagram the relationships. -MPORTA9)E O& ORGA9-=-9G &<9)T-O9 Speciali%ation .rganizational str!ct!re is a network of relationships in which the work is divided into !nits and departments. )his division of work is helping in bringing specialization in vario!s activities of concern. ,ell defined obs .rganizational str!ct!re helps in p!tting right men on right /ob which can be done by selecting people for vario!s departments according to their *!alifications, skill and e+perience. )his is helping in defining the /obs properly which clarifies the role of every person. ithout responsibility leads to ineffective behavior and responsibility ithout authority ma)es person ineffective.1 )herefore, co ordination of a!thority responsibility is very important. Effecti!e administration > )he organization str!ct!re is helpf!l in defining the /obs positions. )he roles to be performed by different managers are clarified. 'pecialization is achieved thro!gh division of work. )his all leads to efficient and effective administration. Growth and di!ersification 8 A companys growth is totally dependent on how efficiently and smoothly a concern works. Efficiency can be bro!ght abo!t by clarifying the role positions to the managers, co ordination between a!thority and responsibility and concentrating on specialization. In addition to this, a company can diversify if its potential grow. )his is possible only when the organization str!ct!re is well defined. )his is possible thro!gh a set of formal str!ct!re.

PR-9)-P+ES O& ORGA9-=-9G )he organizing process can be done efficiently if the managers have certain g!idelines so that they can take decisions and can act. )o organize in an effective

manner, the following principles of organization can be !sed by a manager. @. $rinciple of 'pecialization According to the principle, the whole work of a concern sho!ld be divided amongst the s!bordinates on the basis of *!alifications, abilities and skills. It is thro!gh division of work specialization can be achieved which res!lts in effective organization. C. $rinciple of #!nctional Definition According to this principle, all the f!nctions in a concern sho!ld be completely and clearly defined to the managers and s!bordinates. )his can be done by clearly defining the d!ties, responsibilities, a!thority and relationships of people towards each other. 2larifications in a!thority responsibility relationships help in achieving co ordination and thereby organization can take place effectively. #or e+ample, the primary f!nctions of prod!ction, marketing and finance and the a!thority responsibility relationships in these departments sho!ld be clearly defined to every person attached to that department. 2larification in the a!thority responsibility relationship helps in efficient organization. D. $rinciples of 'pan of 2ontrol9'!pervision According to this principle, span of control is a span of s!pervision which depicts the n!mber of employees that can be handled and controlled effectively by a single manager. According to this principle, a manager sho!ld be able to handle what n!mber of employees !nder him sho!ld be decided. )his decision can be taken by choosing either from a wide or narrow span. )here are two types of span of control: a. ,ide span of control8 It is one in which a manager can s!pervise and control effectively a large gro!p of persons at one time. )he feat!res of this span are: 3ess overhead cost of s!pervision $rompt response from the employees 1etter comm!nication 1etter s!pervision 1etter co ordination '!itable for repetitive /obs According to this span, one manager can effectively and efficiently handle a large n!mber of s!bordinates at one time. b. 9arrow span of control8 According to this span, the work and a!thority is divided amongst many s!bordinates and a manager doesnBt s!pervises and control a very big gro!p of people !nder him. )he manager according to a narrow span s!pervises a selected n!mber of employees at one time. )he feat!res are: ;ork which re*!ires tight control and s!pervision, for e+ample, handicrafts, ivory work, etc. which re*!ires craftsmanship, there narrow span is more helpf!l.

2o ordination is diffic!lt to be achieved. 2omm!nication gaps can come. &essages can be distorted. 'pecialization work can be achieved.

E. $rinciple of 'calar 2hain According to the principle, the whole work of a concern sho!ld be divided amongst the s!bordinates on the basis of *!alifications, abilities and skills. It is thro!gh division of work specialization can be achieved which res!lts in effective organization. H. $rinciple of 4nity of 2ommand It implies one s!bordinate one s!perior relationship. Every s!bordinate is answerable and acco!ntable to one boss at one time. )his helps in avoiding comm!nication gaps and feedback and response is prompt. 4nity of command also helps in effective combination of reso!rces, that is, physical, financial reso!rces which helps in easy co ordination and, therefore, effective organization. Foundation of Organizing )hapter 5; &undamentals of organi%ing Organi%ing is the f!nction of management which follows planning. It is a f!nction in which the synchronization and combination of h!man, physical and financial reso!rces takes place. All the three reso!rces are important to get res!lts. )herefore, organizational f!nction helps in achievement of res!lts which in fact is important for the f!nctioning of a concern. According to ,hester 0arnard, 5.rganizing is a f!nction by which the concern is able to define the role positions, the /obs related and the co ordination between a!thority and responsibility. (ence, a manager always has to organize in order to get res!lts. .rganizing is the process of identifying and gro!ping the work to be performed, defining and delegating a!thority, and establishing relationships to enable people to work together to achieve the organizationBs ob/ectives. In essence, organizing involves the gro!ping of activities and reso!rces in a logical fashion. The structure and process of organizing 3ooking at organizing as a process re*!ires that several f!ndamentals to be considered. In the first place str!ct!re m!st reflect ob/ectives and plans beca!se activities derive from them .in the second place, it m!st reflect the a!thority available to an enterprises management .A!thority in a given organization is a socially determined right to e+ercise direction, it is s!b/ect to change. In the third place, an organization str!ct!re, like any plan, m!st reflect its environment .G!st as the premises of

a plan may be economic, technological, political, social or ethical, so may be those of an organization str!ct!re. It m!st be designed to work, to permit contrib!tions by members of a gro!p, and to help people can gain ob/ectives efficiently in changing f!t!re .In this sense, a workable organization str!ct!re can never be static. )here is no single organization str!ct!re that works best in all kinds of sit!ations. An effective organization str!ct!re depends on the sit!ation. In the fo!rth place, since the organization is staffed with people, the gro!ping of activities and the a!thority relationships of an organization str!ct!re m!st take into acco!nt peoples limitations and c!stoms. )his is not to say that the str!ct!re m!st be designed aro!nd individ!als instead of aro!nd goals and accompanying activities. 1!t the consideration is the kinds of people who are to staff it. )he organizing process consists of the following steps Re!iew plans and ob ecti!es1 .b/ectives are the specific activities that m!st be completed to achieve goals. $lans shape the activities needed to reach those goals. &anagers m!st e+amine plans initially and contin!e to do so as plans change and new goals are developed. 2etermine the wor' acti!ities necessary to accomplish ob ecti!es1 Altho!gh this task may seem overwhelming to some managers, it doesnBt need to be. &anagers simply list and analyze all the tasks that need to be accomplished in order to reach organizational goals. )lassify and group the necessary wor' acti!ities into manageable units1 A manager can gro!p activities based on fo!r models of departmentalization: f!nctional, geographical, prod!ct, and c!stomer. Assign acti!ities and delegate authority1 &anagers assign the defined work activities to specific individ!als. Also, they give each individ!al the a!thority -right0 to carry o!t the assigned tasks. 2esign a hierarchy of relationships1 A manager sho!ld determine the vertical -decision making0 and horizontal -coordinating0 relationships of the organization as a whole. :e+t, !sing the organizational chart, a manager sho!ld diagram the relationships. -MPORTA9)E O& ORGA9-=-9G &<9)T-O9 Speciali%ation .rganizational str!ct!re is a network of relationships in which the work is divided into !nits and departments. )his

division of work is helping in bringing specialization in vario!s activities of concern. ,ell defined obs .rganizational str!ct!re helps in p!tting right men on right /ob which can be done by selecting people for vario!s departments according to their *!alifications, skill and e+perience. )his is helping in defining the /obs properly which clarifies the role of every person. )larifies authority .rganizational str!ct!re helps in clarifying the role positions to every manager -stat!s *!o0. )his can be done by clarifying the powers to every manager and the way he has to e+ercise those powers sho!ld be clarified so that mis!se of powers does not take place. ;ell defined /obs and responsibilities attached helps in bringing efficiency into managers working. )his helps in increasing prod!ctivity. )o8ordination .rganization is a means of creating co ordination among different departments of the enterprise. It creates clear c!t relationships among positions and ens!res m!t!al co operation among individ!als. (armony of work is bro!ght by higher level managers e+ercising their a!thority over interconnected activities of lower level manager. A!thority responsibility relationships can be fr!itf!l only when there is a formal relationship between the two. #or smooth r!nning of an organization, the co ordination between a!thority responsibilities is very important. )here sho!ld be co ordination between different relationships. 2larity sho!ld be made for having an !ltimate responsibility attached to every a!thority. )here is a saying, 5$uthority ithout responsibility leads to ineffective behavior and responsibility ithout authority ma)es person ineffective.1 )herefore, co ordination of a!thority responsibility is very important. Effecti!e administration > )he organization str!ct!re is helpf!l in defining the /obs positions. )he roles to be performed by different managers are clarified. 'pecialization is achieved thro!gh division of work. )his all leads to efficient and effective administration. Growth and di!ersification 8 A companys growth is totally dependent on how efficiently and smoothly a concern works. Efficiency can be bro!ght abo!t by clarifying the role positions to the managers, co ordination between a!thority and responsibility and concentrating on specialization. In addition to this, a company can diversify if its potential grows. )his is possible only when the organization str!ct!re is well defined. )his is possible thro!gh a set of formal str!ct!re. PR-9)-P+ES O& ORGA9-=-9G

)he organizing process can be done efficiently if the managers have certain g!idelines so that they can take decisions and can act. )o organize in an effective manner, the following principles of organization can be !sed by a manager. @. $rinciple of 'pecialization According to the principle, the whole work of a concern sho!ld be divided amongst the s!bordinates on the basis of *!alifications, abilities and skills. It is thro!gh division of work specialization can be achieved which res!lts in effective organization. C. $rinciple of #!nctional Definition According to this principle, all the f!nctions in a concern sho!ld be completely and clearly defined to the managers and s!bordinates. )his can be done by clearly defining the d!ties, responsibilities, a!thority and relationships of people towards each other. 2larifications in a!thority responsibility relationships help in achieving co ordination and thereby organization can take place effectively. #or e+ample, the primary f!nctions of prod!ction, marketing and finance and the a!thority responsibility relationships in these departments sho!ld be clearly defined to every person attached to that department. 2larification in the a!thority responsibility relationship helps in efficient organization. D. $rinciples of 'pan of 2ontrol9'!pervision According to this principle, span of control is a span of s!pervision which depicts the n!mber of employees that can be handled and controlled effectively by a single manager. According to this principle, a manager sho!ld be able to handle what n!mber of employees !nder him sho!ld be decided. )his decision can be taken by choosing either from a wide or narrow span. )here are two types of span of control:

narrow span s!pervises a selected n!mber of employees at one time. )he feat!res are: ;ork which re*!ires tight control and s!pervision, for e+ample, handicrafts, ivory work, etc. which re*!ires craftsmanship, there narrow span is more helpf!l. 2o ordination is diffic!lt to be achieved. 2omm!nication gaps can come. &essages can be distorted. 'pecialization work can be achieved.

'. $rinciple of 'calar 2hain

'calar chain is a chain of command or a!thority which flows from top to bottom. ;ith a chain of a!thority available, wastages of reso!rces are minimized, comm!nication is affected, overlapping of work is avoided and easy organization takes place. A scalar chain of command facilitates work flow in an organization which helps in achievement of effective res!lts. As the a!thority flows from top to bottom, it clarifies the a!thority positions to managers at all level and that facilitates effective organization.

(. $rinciple of 4nity of 2ommand

a. ,ide span of control8 It is one in which a

manager can s!pervise and control effectively a large gro!p of persons at one time. )he feat!res of this span are: 3ess overhead cost of s!pervision $rompt response from the employees 1etter comm!nication 1etter s!pervision 1etter co ordination '!itable for repetitive /obs According to this span, one manager can effectively and efficiently handle a large n!mber of s!bordinates at one time. 9arrow span of control8 According to this span, the work and a!thority is divided amongst many s!bordinates and a manager doesnBt s!pervises and control a very big gro!p of people !nder him. )he manager according to a

It implies one s!bordinate one s!perior relationship. Every s!bordinate is answerable and acco!ntable to one boss at one time. )his helps in avoiding comm!nication gaps and feedback and response is prompt. 4nity of command also helps in effective combination of reso!rces, that is, physical, financial reso!rces which helps in easy co ordination and, therefore, effective organization. Authority &lows from Top to Bottom Managing 2irector ? Mar'eting Manager ? Sales* Media Manager ? Salesmen According to the above diagram, the &anaging Director has got the highest level of a!thority. )his a!thority is shared by the &arketing &anager who shares his a!thority with the 'ales &anager. #rom this chain of hierarchy, the official chain of comm!nication becomes clear which is helpf!l in achievement of res!lts and which provides stability to a concern. )his scalar chain of command always flows from top to bottom and it defines the a!thority positions of different managers at different levels. )+ASS-&-)AT-O9 O& ORGA9-=AT-O9S .rganizations are basically classified on the basis of relationships. )here are two types of organizations formed on the basis of relationships in an organization 01 &ormal Organi%ation 8 )his is one which refers to a str!ct!re of well defined /obs each bearing a meas!re of a!thority and responsibility. It is a conscio!s determination by which people accomplish goals by adhering to the norms laid

b.

down by the str!ct!re. )his kind of organization is an arbitrary set !p in which each person is responsible for his performance. #ormal organization has a formal set !p to achieve pre determined goals. C. -nformal Organi%ation 8 It refers to a network of personal and social relationships which spontaneo!sly originates within the formal set !p. Informal organizations develop relationships which are b!ilt on likes, dislikes, feelings and emotions. )herefore, the network of social gro!ps based on friendships can be called as informal organizations. )here is no conscio!s effort made to have informal organization. It emerges from the formal organization and it is not based on any r!les and reg!lations as in case of formal organization. Relationship between formal and informal organizations #or a concerns working both formal and informal organization are important. #ormal organization originates from the set organizational str!ct!re and informal organization originates from formal organization. #or an efficient organization, both formal and informal organizations are re*!ired. )hey are the two phase of a same concern. #ormal organization can work independently. 1!t informal organization depends totally !pon the formal organization. #ormal and informal organization helps in bringing efficient working organization and smoothness in a concern. ;ithin the formal organization, the members !ndertake the assigned d!ties in co operation with each other. )hey interact and comm!nicate amongst themselves. )herefore, both formal and informal organizations are important. ;hen several people work together for achievement of organizational goals, social tie !ps tends to b!ilt and therefore informal organization helps to sec!re co operation by which goals can be achieved smooth. )herefore, we can say that informal organization emerges from formal organization. +ine Organi%ation +ine organi%ation is the oldest and simplest method of administrative organization. According to this type of organization, the a!thority flows from top to bottom in a concern. )he line of command is carried o!t from top to bottom. )his is the reason for calling this organization as scalar organization which means scalar chain of command is a part and parcel of this type of administrative organization. In this type of organization, the line of command flows on an even basis witho!t any gaps in comm!nication and co ordination taking place. #eat!res of 3ine .rganization @ .It is the simplest form of organization. C. 3ine of a!thority flows from top to bottom. D. 'pecialized and s!pportive services do not take place in this organization.

E. 4nified control by the line officers can be maintained since they can independently take decisions in their areas and spheres. H. )his kind of organization always helps in bringing efficiency in comm!nication and bringing stability to a concern.

&erits of 3ine .rganization @. Simplest8 It is the most simple and oldest method of administration. C. <nity of )ommand8 In these organizations, s!perior s!bordinate relationship is maintained and scalar chain of command flows from top to bottom. D. Better discipline8 )he control is !nified and concentrates on one person and therefore, he can independently make decisions of his own. 4nified control ens!res better discipline. E .&i/ed responsibility8 In this type of organization, every line e+ec!tive has got fi+ed a!thority, power and fi+ed responsibility attached to every a!thority. ). &le/ibility8 )here is a co ordination between the top most a!thority and bottom line a!thority. 'ince the a!thority relationships are clear, line officials are independent and can fle+ibly take the decision. )his fle+ibility gives satisfaction of line e+ec!tives. Demerits of 3ine .rganization @. O!er reliance8 )he line e+ec!tives decisions are implemented to the bottom. )his res!lts in over relying on the line officials. C. +ac' of speciali%ation8 A line organization flows in a scalar chain from top to bottom and there is no scope for specialized f!nctions. #or e+ample, e+pert advices whatever decisions are taken by line managers are implemented in the same way. D. -nade:uate communication8 )he policies and strategies which are framed by the top a!thority are carried o!t in the same way. )his leaves no scope for comm!nication from the other end. )he complaints and s!ggestions of lower a!thority are not comm!nicated back to the top a!thority. 'o there is one way comm!nication. E .+ac' of )o8ordination8 ;hatever decisions are taken by the line officials, in certain sit!ations wrong decisions, are carried down and implemented in the same way. )herefore, the degree of effective co ordination is less.

+ine and Staff Organi%ation 3ine and staff organization is a modification of line organization and it is more comple+ than line organization. According to this administrative organization, specialized and s!pportive activities are attached to the line of command by appointing staff s!pervisors and staff specialists who are attached to the line a!thority. )he power of command always remains with the line e+ec!tives and staff s!pervisors g!ide, advice and co!ncil the line e+ec!tives. $ersonal 'ecretary to the &anaging Director is a staff official. @. Speciali%ation8 1etter division of labor takes place which res!lts in specialization of f!nction and its conse*!ent benefit. C. Effecti!e )ontrol8 &anagement control is simplified as the mental f!nctions are separated from man!al f!nctions. 2hecks and balances keep the a!thority within certain limits. 'pecialists may be asked to /!dge the performance of vario!s sections. D. Efficiency8 ,reater efficiency is achieved beca!se of every f!nction performing a limited n!mber of f!nctions. E. Economy8 'pecialization compiled with standardization facilitates ma+im!m prod!ction and economical costs. H. E/pansion8 E+pert knowledge of f!nctional manager facilitates better control and s!pervision. Demerits of #!nctional .rganization 1. )onfusion8 )he f!nctional system is *!ite complicated to p!t into operation, especially when it is carried o!t at low levels. )herefore, co ordination becomes diffic!lt. C .+ac' of )o8 ordination8 Disciplinary control becomes weak as a worker is commanded not by one person b!t a large n!mber of people. )h!s, there is no !nity of command. D. 2ifficulty in fi/ing responsibility8 1eca!se of m!ltiple a!thority, it is diffic!lt to fi+ responsibility. E. )onflicts8 )here may be conflicts among the s!pervisory staff of e*!al ranks. )hey may not agree on certain iss!es. H. )ostly8 &aintenance of specialists staff of the highest order is e+pensive for a concern. Matri/ organi%ation It is an attempt to combine the advantages of the p!re f!nctional str!ct!re and the prod!ct organizational str!ct!re. )his form is identically s!ited for companies, s!ch as constr!ction, that are 5pro/ect driven6. )he fig!re below shows a typical &atri+ organization. In a matri+ organization, each pro ect manager reports directly to the vice president and the general manager. 'ince each pro/ect represents a potential profit centre, the power and a!thority !sed by the pro/ect manager come directly from the general manager. -nformation sharing is mandatory in s!ch an organization, and several people may be re*!ired for the same piece of work. (owever, in general, the pro/ect manager has the total responsibility and acco!ntability for the s!ccess of the pro/ect. )he f!nctional departments, on the other hand, have f!nctional responsibility to maintain technical e+cellence on the pro/ect. Each f!nctional !nit is headed by a department manager whose prime responsibility is to ens!re that a !nified technical base is

Ad!antages; 3ine relationship helps keeping discipline. )here will be an improvement in *!ality with less wastage of material and time. )here is clear c!t a!thority, responsibility and channel of comm!nication. It makes !se of specialists to give e+pert advice to workers. 2isad!antages; 2hances of misinterpretation and conf!sion 2hanges of friction in higher levels. &ore overhead charges beca!se of many e+perts. If any section is slow in its work it affects all other sections. &unctional Organi%ation &unctional organi%ation has been divided to p!t the specialists in the top position thro!gho!t the enterprise. )his is an organization in which we can define as a system in which f!nctional department are created to deal with the problems of b!siness at vario!s levels. #!nctional a!thority remains confined to f!nctional g!idance to different departments. )his helps in maintaining *!ality and !niformity of performance of different f!nctions thro!gho!t the enterprise. )he concept of #!nctional organization was s!ggested by #.;. )aylor who recommended the appointment of specialists at important positions. #or e+ample, the f!nctional head and &arketing Director directs the s!bordinates thro!gho!t the organization in his partic!lar area. )his means that s!bordinates receives orders from several specialists, managers working above them. &erits of #!nctional .rganization

maintained and that all available information can be e+changed for each pro/ect.

Typical atri! organization )he basis for the matri/ organi%ation is an endeavor to create synergism thro!gh shared responsibility between pro/ect and f!nctional management. 2E+EGAT-O9 O& A<T$OR-T@ A manager alone cannot perform all the tasks assigned to him. In order to meet the targets, the manager sho!ld delegate a!thority. Delegation of A!thority means division of a!thority and powers downwards to the s!bordinate. Delegation is abo!t entr!sting someone else to do parts of yo!r /ob. Delegation of a!thority can be defined as s!bdivision and s!b allocation of powers to the s!bordinates in order to achieve effective res!lts. 2elegation of authority is the base of s!perior s!bordinate relationship, it involves following steps: @ .Assignment of 2uties > )he delegator first tries to define the task and d!ties to the s!bordinate. (e also has to define the res!lt e+pected from the s!bordinates. 2larity of d!ty as well as res!lt e+pected has to be the first step in delegation. C. Granting of authority > '!bdivision of a!thority takes place when a s!perior divides and shares his a!thority with the s!bordinate. It is for this reason, every s!bordinate sho!ld be given eno!gh independence to carry the task given to him by his s!periors. )he managers at all levels delegate a!thority and power which is attached to their /ob positions. )he s!bdivision of powers is very important to get effective res!lts. D .)reating Responsibility and Accountability > )he delegation process does not end once powers are granted to the s!bordinates. )hey at the same time have to be obligatory towards the d!ties assigned to them. %esponsibility is said to be the factor or obligation of an individ!al to carry o!t his d!ties in best of his ability as per the directions of s!perior. %esponsibility is very important. )herefore, it is that which gives effectiveness to a!thority. At the same time, responsibility is absol!te and cannot be shifted. Acco!ntability, on the others hand, is the obligation of the individ!al to carry o!t his d!ties as per the standards of

performance. )herefore, it is said that a!thority is delegated, responsibility is created and acco!ntability is imposed. Acco!ntability arises o!t of responsibility and responsibility arises o!t of a!thority. )herefore, it becomes important that with every a!thority position an e*!al and opposite responsibility sho!ld be attached. %elationship between A!thority and %esponsibility A!thority is the legal right of person or s!perior to command his s!bordinates while acco!ntability is the obligation of individ!al to carry o!t his d!ties as per standards of performance A!thority flows from the s!periors to s!bordinates, in which orders and instr!ctions are given to s!bordinates to complete the task. It is only thro!gh a!thority, a manager e+ercises control. In a way thro!gh e+ercising the control the s!perior is demanding acco!ntability from s!bordinates. If the marketing manager directs the sales s!pervisor for HK !nits of sale to be !ndertaken in a month. If the above standards are not accomplished, it is the marketing manager who will be acco!ntable to the chief e+ec!tive officer. )herefore, we can say that a!thority flows from top to bottom and responsibility flows from bottom to top. Acco!ntability is a res!lt of responsibility and responsibility is res!lt of a!thority. )herefore, for every a!thority an e*!al acco!ntability is attached. -mportance of 2elegation Delegation of a!thority is a process in which the a!thority and powers are divided and shared amongst the s!bordinates. ;hen the work of a manager gets beyond his capacity, there sho!ld be some system of sharing the work. )his is how delegation of a!thority becomes an important tool in organization f!nction. )hro!gh delegation, a manager, in fact, is m!ltiplying himself by dividing9m!ltiplying his work with the s!bordinates. )he importance of delegation can be /!stified by 7 @.)hro!gh delegation, a manager is able to divide the work and allocate it to the s!bordinates. )his helps in red!cing his work load so that he can work on important areas s!ch as planning, b!siness analysis etc. 0A B $ a g e

H. Delegation of a!thority is help to both s!perior and s!bordinates. )his, in a way, gives stability to a concerns working. ;ith effective res!lts, a concern can think of creating more departments and divisions flow working. )his will re*!ire creation of more managers which can be f!lfilled by shifting the e+perienced, skilled managers to these positions. )his helps in both virt!al as well as horizontal growth which is very important for a concerns stability. )herefore, from the above points, we can /!stify that delegation is not /!st a process b!t it is a way by which manager m!ltiples himself and is able to bring stability, ability and so!ndness to a concern. Principles of 2elegation )here are a few g!idelines in form of principles which can be a help to the manager to process of delegation. )he principles of delegation are as follows: @ .Principle of result e/cepted8 s!ggests that every manager before delegating the powers to the s!bordinate sho!ld be able to clearly define the goals as well as res!lts e+pected from them. )he goals and targets sho!ld be completely and clearly defined and the standards of performance sho!ld also be notified clearly. #or e+ample, a marketing manager e+plains the salesmen regarding the !nits of sale to take place in a partic!lar day, say ten !nits a day have to be the target sales. ;hile a marketing manger provides these g!idelines of sales, mentioning the target sales is very important so that the salesman can perform his d!ty efficiently with a clear set of mind. C. Principle of Parity of Authority and Responsibility8 According to this principle, the manager sho!ld keep a balance between a!thority and responsibility. 1oth of them sho!ld go hand in hand. According to this principle, if a s!bordinate is given a responsibility to perform a task, then at the same time he sho!ld be given eno!gh independence and power to carry o!t that task effectively. )his principle also does not provide e+cessive a!thority to the s!bordinate which at times can be mis!sed by him. )he a!thority sho!ld be given in s!ch a way which matches the task given to him. )herefore, there sho!ld be no degree of disparity between the two. D. Principle of absolute responsibility8 )his says that the a!thority can be delegated b!t responsibility cannot be delegated by managers to his s!bordinates which means responsibility is fi+ed. )he manager at every level, no matter what is his a!thority, is always responsible to his s!perior for carrying o!t his task by delegating the powers. It does not means that he can escape from his responsibility. (e will always remain responsible till the completion of task. Every s!perior is responsible for the acts of their s!bordinates and are acco!ntable to their s!perior, therefore the s!periors cannot

C.;ith the red!ction of load on s!perior, he can concentrate his energy on important and critical iss!es of concern. )his way he is able to bring effectiveness in his work as well in the work !nit. )his effectively helps a manager to prove his ability and skills in the best manner. D.Delegation of a!thority is the gro!nd on which the s!perior s!bordinate relationship stands. An organization f!nctions as the a!thority flows from top level to bottom. )his in fact shows that thro!gh delegation, the s!perior s!bordinate relationship become meaningf!l. )he flow of a!thority is from top to bottom which is a way of achieving res!lts. E.Delegation of a!thority in a way gives eno!gh room and space to the s!bordinates to flo!rish their abilities and skill. )hro!gh delegating powers, the s!bordinates get a feeling of importance. )hey get motivated to work and this motivation provides appropriate res!lts to a concern. Gob satisfaction is an important criterion to bring stability and so!ndness in the relationship between s!perior and s!bordinates. Delegation also helps in breaking the monotony of the s!bordinates so that they can be more creative and efficient. Delegation of a!thority is not only helpf!l to the s!bordinates b!t it also helps the managers to develop their talents and skills. 'ince the manager get eno!gh time thro!gh delegation to concentrate on important iss!es, their decision making gets strong and in a way they can flo!rish the talents which are re*!ired in a manager. )hro!gh granting powers and getting the work done, helps the manager to attain comm!nication skills, s!pervision and g!idance, effective motivation and the leadership traits are flo!rished. )herefore it is only thro!gh delegation, a manager can be tested on his traits.

pass the blame to the s!bordinates even if he has delegated certain powers to s!bordinates e+ample if the prod!ction manager has been given a work and the machine breaks down. If repairmen are not able to get repair work done, prod!ction manager will be responsible to 2E. if their prod!ction is not completed. E.Principle of Authority le!el8 )his principle s!ggests that a manager sho!ld e+ercise his a!thority within the /!risdiction 9 framework given. )he manager sho!ld be forced to cons!lt their s!periors with those matters of which the a!thority is not given that means before a manager takes any important decision, he sho!ld make s!re that he has the a!thority to do that on the other hand, s!bordinate sho!ld also not fre*!ently go with regards to their complaints as well as s!ggestions to their s!perior if they are not asked to do. )his principle emphasizes on the degree of a!thority and the level !p to which it has to be maintained. )entrali%ation and 2ecentrali%ation )entrali%ation is said to be a process where the concentration of decision making is in a few hands. All the important decision and actions at the lower level, all s!b/ects and actions at the lower level are s!b/ect to the approval of top management. According to Allen, 52entralization6 is the systematic and consistent reservation of a!thority at central points in the organization. )he implication of centralization can be : @. %eservation of decision making power at top level. C. %eservation of operating a!thority with the middle level managers. D. %eservation of operation at lower level at the directions of the top level. 4nder centralization, the important and key decisions are taken by the top management and the other levels are into implementations as per the directions of top level. #or e+ample, in a b!siness concern, the father > son being the owners decide abo!t the important matters and all the rest of f!nctions like prod!ct, finance, marketing, personnel, are carried o!t by the department heads and they have to act as per instr!ction and orders of the two people. )herefore in this case, decision making power remain in the hands of father > son. .n the other hand, 2ecentrali%ation is a systematic delegation of a!thority at all levels of management and in all of the organization. In a decentralization concern, a!thority in retained by the top management for taking ma/or decisions and framing policies concerning the whole concern. %est of the a!thority may be delegated to the middle level and lower level of management. )he degree of centrali%ation and decentrali%ation will depend !pon the amo!nt of a!thority delegated to the lowest level.

According to Allen, 5Decentralization refers to the systematic effort to delegate to the lowest level of a!thority e+cept that which can be controlled and e+ercised at central points. Decentralization is not the same as delegation. In fact, decentralization is all e+tension of delegation. Decentralization pattern is wider is scope and the a!thorities are diff!sed to the lowest most level of management. Delegation of a!thority is a complete process and takes place from one person to another. ;hile decentralization is complete only when f!llest possible delegation has taken place. #or e+ample, the general manager of a company is responsible for receiving the leave application for the whole of the concern. )he general manager delegates this work to the personnel manager who is now responsible for receiving the leave applicants. In this sit!ation delegation of a!thority has taken place. .n the other hand, on the re*!est of the personnel manager, if the general manager delegates this power to all the departmental heads at all level, in this sit!ation decentralization has taken place. )here is a saying that 5Everything that increasing the role of s!bordinates is decentralization and that decreases the role is centralization6. Decentralization is wider in scope and the s!bordinates responsibility increase in this case. .n the other hand, in delegation the managers remain answerable even for the acts of s!bordinates to their s!periors. Organi%ation subsystems Every system has s!bsystem has s!bsystems which are interrelated to constit!te system as entity. 'ince the organization is a system, it contains vario!s s!bsystems. )he levels of systems within the organisation are called s!bsystems. Each s!bsystem is identified by certain ob/ectives, processes, str!ct!res and norms of cond!ct. Each !nit of the organisation, as s!ch, is a s!bsystem. )here is another way of classifying s!bsystems which may be fo!nd in each f!nctional !nit. Accordingly, there are vario!s s!bsystems in the organisation and have been classified in different ways. #or e+ample, 'eiler has identified fo!r components in an organisation system. )hese are: h!man inp!ts, technological in p!ts, organisational inp!ts and social str!ct!re and norms. #rom these inp!ts, he derives the concept of socio technical system, which can be applied to the analysis of specific cases in formal organisation. 8ast and %osenzweig have identified five s!bsystems. )hese are: goals and val!e s!bsystem, psychological s!bsystems, technical s!bsystem, str!ct!ral s!bsystem, and managerial s!bsystem. A more comprehensive view has been adopted by 2arzo and Lano!zas who identify technical s!bsystem, social s!bsystem, and power s!bsystem. )hese s!bsystems are

interconnected and interrelated. )he totality of all these s!bsystems with their interconnections makes !p the system of formal organisation.

1. Technical

Subsystem1 )he technical s!bsystem refers to the knowledge re*!ired for the performance of tasks, incl!ding the techni*!es !sed on the transformation of inp!ts into o!tp!t. )he ob/ectives of formal organisation have technical re*!irements, that is , some work has to be completed to meet the ob/ectives. )he basic component of the technical s!bsystem is a /ob which is a gro!p of tasks or activities that can be performed by one man. )he person, who is assigned a /ob, m!st perform certain d!ties. In essence, he is asked to play a role and his role may involve decision making, comm!nication and other action which relates him with other parts of the organisation. 1ehavio!r in the technical s!bsystem is governed by r!les, proced!res, and policies. )echnical s!bsystem constit!tes formal organization, that is, the formal arrangement of the f!nctions. )he formal organisation is the interrelated pattern of /obs which make !p the str!ct!re, r!les, and proced!res of the organisation. )he behavio!r in the organisation is not e+plained f!lly by the technical s!bsystem alone beca!se there is a f!ndamental conflict between individ!al a part of the system and system itself res!lting from the demands made by the system and the individ!al e+pectancies regarding the work he has to perform. 31 Social Subsystem1 Every organisation has a social s!bsystem which is composed of individ!als and gro!ps in interaction. As s!ch, there are vario!s elements of social s!bsystem. )he first basic element of the social s!bsystem is the individuals. .rganizations e+ist beca!se persons need them to do things that either they co!ld not do as well or co!ld not do at all witho!t organization the individ!als bring personality str!ct!re with motives and attit!des which condition the range of e+pectancies which they hope to satisfy by participating in the organization. Another element of the social s!bsystem is the informal organisation which is the res!lt of the operation ofsocio psychological forces at work place. An interaction e+ists between an individ!al and informal gro!p. )his interaction can be interpreted in terms of m!t!al modification of e+pectancies. )he informal organisation e+pects certain norms of behavio!r from its members and individ!al has e+pectancies of psychological satisfaction he hopes to derive from association with people on the /ob. )he third element of the social s!bsystem comprises status% role% norm and value. 'tat!s is a position that is determined as being important in the interpersonal relationships of

the gro!p. Thus it is a social ran) of a person in comparison ith a social system. %ole is the patterns of actions e+pected of a person in his position involving others. Thus it describes specific form of behaviour and develops originally form tas) re2uirement. -orm is the general e3pectation of demand character for all role incumbent of system or subsystem. 4alue is the more generalized ideological justification and aspirations. %ole, norm, and val!e differ both with respect to generality and with respect of the type of /!stification mobilized to sanction behavio!r. 2. Power Subsystem1 Every organisation has a power s!bsystem and people in the organisation elaborate their behavio!r thro!gh the power relationship. (o er may be defined as the capacity to ind!ce others to prod!ce an intended res!lt thro!gh the presentation of force. ;hile the !se of force is not always involved in the power relation, it is apparent that the power holder will !se force, if necessary. '!ch power maybe possessed by both s!periors and s!bordinates. )lassical Organi%ation Theory 2lassical organization theory evolved d!ring the first half of this cent!ry. It represents the merger of scientific management, b!rea!cratic theory, and administrative theory. #rederick )aylor -@M@J0 developed scientific management theory -often called N)aylorismN0 at the beginning of this cent!ry. (is theory had fo!r basic principles: @0 find the one Nbest wayN to perform each task, C0 caref!lly match each worker to each task, D0 closely s!pervise workers, and !se reward and p!nishment as motivators, and E0 the task of management is planning and control. Initially, )aylor was very s!ccessf!l at improving prod!ction. (is methods involved getting the best e*!ipment and people, and then caref!lly scr!tinizing each component of the prod!ction process. 1y analyzing each task individ!ally, )aylor was able to find the right combinations of factors that yielded large increases in prod!ction. ;hile )aylorBs scientific management theory proved s!ccessf!l in the simple ind!strialized companies at the t!rn of the cent!ry, it has not faired well in modern companies. )he philosophy of Nprod!ction first, people secondN has left a legacy of declining prod!ction and *!ality, dissatisfaction with work, loss of pride in workmanship, and a near complete loss of organizational pride. &a+ ;eber -@MEJ0 e+panded on )aylorBs theories, and stressed the need to red!ce diversity and ambig!ity in organizations. )he foc!s was on establishing clear lines of a!thority and control. ;eberBs bureaucratic theory emphasized the need for a hierarchical str!ct!re of power. It recognized the

importance of division of labor and specialization. A formal set of r!les was bo!nd into the hierarchy str!ct!re to ins!re stability and !niformity. ;eber also p!t forth the notion that organizational behavio!r is a network of h!man interactions, where all behavio!r co!ld be !nderstood by looking at ca!se and effect. $dministrative theory -i.e., principles of management0 was formalized in the @MDKBs by &ooney and %eiley -@MD@0. )he emphasis was on establishing a !niversal set of management principles that co!ld be applied to all organizations. 2lassical management theory was rigid and mechanistic. )he shortcomings of classical organization theory *!ickly became apparent. Its ma/or deficiency was that it attempted to e+plain peoplesB motivation to work strictly as a f!nction of economic reward. Organizations and "ob #esign Options Individ!als, Gob Design, and 'tress $lanning ahead * ;hat is the meaning of workO * ;hat are the iss!es in satisfaction, performance, and /ob designO * (ow can /obs be enrichedO * ;hat are alternative work arrangementsO * (ow can /ob and workplace stress be managedO ;hat is the meaning of workO 1asic backgro!nd on work < * ;ork can be a 5t!rn on6 or a 5t!rn off.6 * $eople are the fo!ndations of high performance in the workplace. * ?al!ing people and creating /obs and work environments that respect peoples needs and potential will benefit everyone. $sychological contract * An informal !nderstanding abo!t what an individ!al gives to and receives from an organization as part of the employment relationship. * A person has a healthy psychological contract in the ideal work sit!ation. #air e+change of contrib!tions and ind!cements. ;ork and the *!ality of life A!ality of work life * )he overall *!ality of h!man e+periences in the workplace. * An important component of *!ality of life. ;ork life balance * #it between ones /ob or work responsibilities and personal or family needs. * )he goal is to achieve a prod!ctive and satisfying balance between work and personal life. ;hat are the iss!es in satisfaction, performance, and /ob designO Gob * A collection of tasks performed in s!pport of organizational ob/ectives. Gob design

)he process of creating or defining /obs by assigning specific work tasks to individ!als and gro!ps. ,oals of /ob design * (igh levels of /ob satisfaction. (igh levels of /ob performance. Gob satisfaction o )he degree to which an individ!al feels positively or negatively abo!t vario!s aspects of the /ob. o 2ommon aspects of /ob satisfaction: $ay )asks '!pervision 2oworkers ;ork setting Advancement opport!nities 'atisfaction related concepts having *!ality of work life implications < o Gob involvement )he e+tent to which an individ!al is dedicated to a /ob. o .rganizational commitment 3oyalty of an individ!al to the organization. Gob performance o )he *!antity and *!ality of tasks accomplished by an individ!al or gro!p at work. o $erformance is a cornerstone of prod!ctivity. o Effective managers design /obs that help people achieve both satisfaction and high performance. Individ!al performance e*!ation o $erformance begins with ability o $erformance re*!ires s!pport o $erformance involves effort *

Gob design alternatives A good /ob design provides a good fit between the worker and the task re*!irements. * ?ary along a contin!!m ranging from high to low task specialization. + (igh specialization /ob simplification + &oderate specialization rotation and enlargement 3ow specialization /ob enrichment * Gob simplification

* * *

'tandardizing work proced!res and employing people in well defined and highly specialized tasks. 'implified /obs are narrow in /ob scope. A!tomation + )otal mechanization of a /ob. + &ost e+treme form of /ob simplification. ;hat are the iss!es in satisfaction, performance, and /ob designO $otential advantages of /ob simplification: * Easier and *!icker training of workers * ;orkers are less diffic!lt to s!pervise * ;orkers are easier to replace * Development of e+pertise in doing repetitive tasks $otential disadvantages of /ob simplification: * 3ow satisfaction * .ccasional tardiness and absenteeism * ;orker boredom * (igh error rates Gob rotation and /ob enlargement * Gob rotation Increases task variety by periodically shifting workers among /obs involving different task assignments. * Gob enlargement Increases task variety by combining two or more tasks previo!sly assigned to separate workers. (orizontal loading Gob enrichment * 1!ilding more opport!nities for satisfaction into a /ob by e+panding its content. * E+pands both /ob scope and /ob depth. * #re*!ently accomplished thro!gh vertical loading. 2hecklist for enriching /obs: * %emove controls that limit peoples discretion in their work. * ,rant people a!thority to make decisions abo!t their work. * &ake people !nderstand their acco!ntability for res!lts. * Allow people to do 5whole6 tasks or complete !nits of work. * &ake performance feedback available to those doing the work. (ow can /obs be enrichedO 2ore characteristics model < * 2ontingency approach to /ob design * &odel foc!ses on: + 2ore /ob characteristics + 2ritical psychological states + Gob o!tcomes + &oderating variables * A /ob high in the core characteristics is enriched. (ow can /obs be enrichedO 2ore /ob characteristics: * 'kill variety * )ask identity * )ask significance * A!tonomy

#eedback 2ritical psychological states: * E+perienced meaningf!lness of work * E+perienced responsibilities for work o!tcomes * 8nowledge of act!al res!lts of work activities Gob o!tcomes: * (igh internal work motivation * (igh growth satisfaction * (igh general /ob satisfaction * (igh work effectiveness &oderating variables: * ,rowth need strength -,:'0 $eople with high ,:' will respond positively to enriched /obs. $eople with low ,:' will respond negatively to enriched /obs. * 8nowledge and skills * 2onte+t satisfaction Improving core /ob characteristics: * #orm nat!ral !nits of work * 2ombine tasks * Establish client relationships * .pen feedback channels * $ractice vertical loading )echnology and /ob enrichment * 'ocio technical systems Gob design that !ses technology to best advantage while still treating people with respect, and allowing their h!man talents to be applied to the f!llest potential. * %obotics 4se of comp!ter controlled machines to completely a!tomate work tasks. A!estions for reflecting on /ob enrichment: * Is it e+pensive to do /ob enrichmentO * ;ill people demand more pay for doing enriched /obsO * 'ho!ld everyones /ob be enrichedO * ;hat do the !nions say abo!t /ob enrichmentO ;hat are alternative work arrangementsO 2ompressed workweek * Any work sched!le that allows a f!ll time /ob to be completed in less than the standard H days of P ho!r shifts. * 1enefitsFmore leis!re time, lower comm!ting costs, lower absenteeism, and potentially improved performance. * DisadvantagesFincreased fatig!e, family ad/!stment problems, increased sched!ling problems, and !nion ob/ections. #le+ible working ho!rs * Any work sched!le that gives employees some choice in the pattern of their daily work ho!rs. 2ore timeFall employees m!st be at work. #le+timeFallows employees to sched!le aro!nd personal and family responsibilities. $otential benefits of fle+ible working ho!rs: *

* * * * *

* * * * * * * * * * * * *

$eople have greater a!tonomy in work sched!ling while ens!ring maintenance of work responsibilities. .rganizations can attract and retain employees who have special non work responsibilities. ;orker morale may be improved. Gob sharing .ne f!ll time /ob is split between two or more persons. ;ork sharing An agreement between employees to c!t back their work ho!rs to avoid layoffs or termination. )elecomm!ting A work arrangement that allows a portion of sched!led work ho!rs to be completed o!tside of the office. ;ork at home A telecomm!ting option that is facilitated by information technology and comp!ter links to clients or c!stomers and a central office. $otential advantages of telecomm!ting: #reedom from < 2onstraints of comm!ting #i+ed ho!rs 'pecial work attire Direct contact with s!pervisors Increased prod!ctivity #ewer work distractions 1eing ones own boss (aving more personal time $otential disadvantages of telecomm!ting: ;orking too m!ch (aving less personal time Diffic!lty in separating work and personal life 3ess time for family #eelings of isolation 3oss of visibility for promotion Diffic!lties s!pervising work at home employees from a distance $art time work ;ork done on any sched!le less than the standard EK ho!r workweek and does not *!alify employee as f!ll time. 2ontingency workers $art time workers who s!pplement the f!ll time workforce, often on a long term basis. :ow constit!te DK percent of the American workforce. anagement

(%& helps establish an organizations s!stainable competitive advantage. Adds val!e to the firm (igh performance work practices lead to both high individ!al and high organizational performance.

E/amples of $igh8Performance ,or' Practices 'elf managed teams Decentralized decision making )raining programs to develop knowledge, skills, and abilities #le+ible /ob assignments .pen comm!nication $erformance based compensation 'taffing based on person7/ob and person7organization fit The $RM Process #!nctions of the (%& $rocess Ens!ring that competent employees are identified and selected. $roviding employees with !p to date knowledge and skills to do their /obs. Ens!ring that the organization retains competent and high performing employees who are capable of high performance. #!nctions of the (%& $rocess Ens!ring that competent employees are identified and selected. $roviding employees with !p to date knowledge and skills to do their /obs. Ens!ring that the organization retains competent and high performing employees who are capable of high performance.

$uman Resource Management Process

$uman Resource

En!ironmental &actors Affecting $RM

)he Importance of (!man %eso!rce &anagement -(%&0 As a necessary part of the organizing f!nction of management 'electing, training, and eval!ating the work force As an important strategic tool

Employee 3abor 4nions .rganizations that represent workers and seek to protect their interests thro!gh collective bargaining. 2ollective bargaining agreement A contract!al agreement between a firm and a !nion

elected to represent a bargaining !nit of employees of the firm in bargaining for wage, ho!rs, and working conditions. ,overnmental 3aws and %eg!lations 3imit managerial discretion in hiring, promoting, and discharging employees. Affirmative Action: the re*!irement that organizations take proactive steps to ens!re the f!ll participation of protected gro!ps in its workforce. En!ironmental &actors Affecting $RM Employee 3abor 4nions .rganizations that represent workers and seek to protect their interests thro!gh collective bargaining. 2ollective bargaining agreement A contract!al agreement between a firm and a !nion elected to represent a bargaining !nit of employees of the firm in bargaining for wage, ho!rs, and working conditions. ,overnmental 3aws and %eg!lations 3imit managerial discretion in hiring, promoting, and discharging employees. Affirmative Action: the re*!irement that organizations take proactive steps to ens!re the f!ll participation of protected gro!ps in its workforce. Managing $uman Resources (!man %eso!rce -(%0 $lanning )he process by which managers ens!re that they have the right n!mber and kinds of people in the right places, and at the right times, who are capable of effectively and efficiently performing their tasks. (elps avoid s!dden talent shortages and s!rpl!ses. 'teps in (% planning: Assessing c!rrent h!man reso!rces Assessing f!t!re needs for h!man reso!rces Developing a program to meet those f!t!re needs )urrent Assessment (!man %eso!rce Inventory A review of the c!rrent make !p of the organizations c!rrent reso!rce stat!s Gob Analysis An assessment that defines a /ob and the behaviors necessary to perform the /ob 8nowledge, skills, and abilities -8'As0 %e*!ires cond!cting interviews, engaging in direct observation, and

collecting the self reports of employees and their managers. Gob Description A written statement of what the /ob holder does, how it is done, and why it is done. Gob 'pecification A written statement of the minim!m *!alifications that a person m!st possess to perform a given /ob s!ccessf!lly. Meeting &uture $uman Resource 9eeds

%eeting &'t're H'"an (es)'rce *eeds

S' l+ ), E" l)+ees -e"and ,)r E" l)+ees

&act)rs A,,ecting Sta,,ing

Strategic .)als &)recast de"and ,)r r)d'cts and services Availabilit+ ), #n)/ledge, s#ills, and abilities

2007 Prentice Hall, Inc. All rights reserved.

121$

Recruitment and 2ecruitment %ecr!itment )he process of locating, identifying, and attracting capable applicants to an organization Decr!itment )he process of red!cing a s!rpl!s of employees in the workforce of an organization E recr!iting %ecr!itment of employees thro!gh the Internet .rganizational web sites .nline recr!iters Selection 'election $rocess )he process of screening /ob applicants to ens!re that the most appropriate candidates are hired. ;hat is 'electionO An e+ercise in predicting which applicants, if hired, will be -or will not be0 s!ccessf!l in performing well on the criteria the organization !ses to eval!ate performance. 'election errors: %e/ect errors for potentially s!ccessf!l applicants Accept errors for !ltimately poor performers Selection 2ecision Outcomes

(alidity and Reliability ?alidity -of $rediction0 A proven relationship between the selection device !sed and some relevant criterion for s!ccessf!l performance in an organization. (igh tests scores e*!ate to high /ob performance" low scores to poor performance. %eliability -of $rediction0 )he degree of consistency with which a selection device meas!res the same thing. Individ!al test scores obtained with a selection device are consistent over m!ltiple testing instances. Selection 2e!ices Application #orms ;ritten )ests $erformance 'im!lations Interviews 1ackgro!nd Investigations $hysical e+aminations ,ritten Tests )ypes of )ests Intelligence: how smart are yo!O Aptit!de: can yo! learn to do itO Attit!de: how do yo! feel abo!t itO Ability: can yo! do it nowO Interest: do yo! want to do itO 3egal 2hallenges to )ests 3ack of /ob relatedness of test items or interview *!estions to /ob re*!irements Discrimination in e*!al employment opport!nity against members of protected classes Performance Simulation Tests )esting an applicants ability to perform act!al /ob behaviors, !se re*!ired skills, and demonstrate specific knowledge of the /ob. ;ork sampling %e*!iring applicants to act!ally perform a task or set of tasks that are central to s!ccessf!l /ob performance. Assessment centers Dedicated facilities in which /ob candidates !ndergo a series of performance sim!lation tests to eval!ate their managerial potential.

Other Selection Approaches Interviews Altho!gh !sed almost !niversally, managers need to approach interviews caref!lly. 1ackgro!nd Investigations ?erification of application data %eference checks: 3ack validity beca!se self selection of references ens!res only positive o!tcomes. $hysical E+aminations 4sef!l for physical re*!irements and for ins!rance p!rposes related to pre e+isting conditions. %ealistic Gob $review -%G$0 )he process of relating to an applicant both the positive and the negative aspects of the /ob. Enco!rages mismatched applicants to withdraw. Aligns s!ccessf!l applicants e+pectations with act!al /ob conditions" red!cing t!rnover. Orientation )ransitioning a new employee into the organization. ;ork !nit orientation #amiliarizes new employee with work !nit goals 2larifies how his or her /ob contrib!tes to !nit goals Introd!ces he or she to his or her coworkers .rganization orientation Informs new employee abo!t the organizations ob/ectives, history, philosophy, proced!res, and r!les. Incl!des a to!r of the entire facility Employee Performance Management $erformance &anagement 'ystem A process of establishing performance standards and appraising employee performance in order to arrive at ob/ective (% decisions and to provide doc!mentation in s!pport of those decisions. )ompensation and Benefits 1enefits of a #air, Effective, and Appropriate 2ompensation 'ystem (elps attract and retain high performance employees Impacts on the strategic performance of the firm )ypes of 2ompensation 1ase wage or salary ;age and salary add ons Incentive payments 'kill based pay ?ariable pay )areer 2e!elopment 2areer Defined

)he se*!ence of positions held by a person d!ring his or her lifetime. )he ;ay It ;as 2areer Development $rovided for information, assessment, and training (elped attract and retain highly talented people :ow Individ!alsFnot the organizationF are responsible for designing, g!iding, and developing their own careers. 1o!ndaryless 2areer A career in which individ!als, not organizations, define career progression and organizational loyalty )urrent -ssues in $RM &anaging Downsizing )he planned elimination of /obs in an organization $rovide open and honest comm!nication. $rovide assistance to employees being downsized. %eass!re and co!nseling to s!rviving employees. &anaging ;ork #orce Diversity ;iden the recr!itment net for diversity Ens!re selection witho!t discrimination $rovide orientation and training that is effective 'e+!al (arassment An !nwanted activity of a se+!al nat!re that affects an individ!als employment. 4nwanted se+!al advances, re*!ests for se+!al favors, and other verbal or physical cond!ct of a se+!al nat!re when s!bmission or re/ection of this cond!ct e+plicitly or implicitly affects an individ!als employment. An offensive or hostile environment An environment in which a person is affected by elements of a se+!al nat!re. ;orkplace %omances $otential liability for harassment ;ork 3ife 1alance Employees have personal lives that they dont leave behind when they come to work. .rganizations have become more att!ned to their employees by offering family8 friendly benefits: .n site child care '!mmer day camps #le+time Gob sharing 3eave for personal matters #le+ible /ob ho!rs 2ontrolling (% 2osts Employee health care Enco!raging healthy lifestyles

#inancial incentives ;ellness programs 2harging employees with poor health habits more for benefits Employee pension plans %ed!cing pension benefits :o longer providing pension plans anaging %hange and &nnovation ,hat -s )hange. .rganizational 2hange Any alterations in the people, str!ct!re, or technology of an organization 2haracteristics of 2hange Is constant yet varies in degree and direction $rod!ces !ncertainty yet is not completely !npredictable 2reates both threats and opport!nities Managing change is an integral part of every managers job. &orces for )hange E+ternal #orces &arketplace ,overnmental laws and reg!lations )echnology 3abor market Economic changes Internal #orces 2hanges in organizational strategy ;orkforce changes :ew e*!ipment Employee attit!des )hange Process (iewpoints )he 2alm ;aters &etaphor 3ewins description of the change process as a break in the organizations e*!ilibri!m state 'nfreezing the stat!s *!o %hanging to a new state Refreezing to make the change permanent ;hite ;ater %apids &etaphor )he lack of environmental stability and predictability re*!ires that managers and organizations contin!ally adapt -manage change actively0 to s!rvive. The )hange Process

)hange Agents 2hange Agents $ersons who act as catalysts and ass!me the responsibility for managing the change process. )ypes of 2hange Agents &anagers: internal entreprene!rs

:onmanagers: change specialists .!tside cons!ltants: change implementation e+perts Three )ategories of )hange

Managing Resistance to )hange ;hy $eople %esist 2hangeO )he ambig!ity and !ncertainty that change introd!ces )he comfort of old habits A concern over personal loss of stat!s, money, a!thority, friendships, and personal convenience )he perception that change is incompatible with the goals and interest of the organization Managerial Actions to Reduce Resistance to )hange Ed!cation and comm!nication $articipation #acilitation and s!pport &anip!lation and co optation 'electing people who accept change 2oercion 2hanging .rganizational 2!lt!res 2!lt!res are nat!rally resistant to change. 2onditions that facilitate c!lt!ral change: )he occ!rrence of a dramatic crisis 3eadership changing hands A yo!ng, fle+ible, and small organization A weak organizational c!lt!re (andling Employee 'tress o 'tress )he adverse reaction people have to e+cessive press!re placed on them from e+traordinary demands, constraints, or opport!nities. #!nctional 'tress 'tress that has a positive effect on performance. o (ow $otential 'tress 1ecomes Act!al 'tress ;hen there is !ncertainty over the o!tcome. ;hen the o!tcome is important. )auses of Stress

Types of )hange 'tr!ct!ral 2hanging an organizations str!ct!ral components or its str!ct!ral design )echnological Adopting new e*!ipment, tools, or operating methods that displace old skills and re*!ire new ones A!tomation: replacing certain tasks done by people with machines 2omp!terization $eople 2hanging attit!des, e+pectations, perceptions, and behaviors of the workforce .rganizational development -.D0 )echni*!es or programs to change people and the nat!re and *!ality of interpersonal work relationships. Organi%ational 2e!elopment Organi%ational Development -.D0 )echni*!es or programs to change people and the nat!re and *!ality of interpersonal work relationships. ,lobal .D .D techni*!es that work for 4.'. organizations may be inappropriate in other co!ntries and c!lt!res. Organi%ational 2e!elopment Techni:ues

Symptoms of Stress

%ed!cing 'tress Engage in proper employee selection 4se realistic /ob interviews for red!ce ambig!ity Improve organizational comm!nications Develop a performance planning program 4se /ob redesign $rovide a co!nseling program .ffer time planning management assistance &aking 2hange (appen '!ccessf!lly Embrace changeFbecome a change capable organization. 2reate a simple, compelling message e+plaining why change is necessary. 2omm!nicate constantly and honestly. #oster as m!ch employee participation as possibleFget all employees committed. Enco!rage employees to be fle+ible. %emove those who resist and cannot be changed. Foundations of (ehavior 4nderstanding Individ!al 1ehavior .rganizational 1ehavior -.10 )he actions of people at work D!al #oc!s of .1 Individ!al behavior Attit!des, personality, perception, learning, and motivation ,ro!p behavior :orms, roles, team b!ilding, leadership, and conflict ,oals of .1 )o e+plain, predict and infl!ence behavior Important Employee 1ehaviors Employee $rod!ctivity A performance meas!re of both efficiency and effectiveness Absenteeism )he fail!re to report to work when e+pected )!rnover )he vol!ntary and invol!ntary permanent withdrawal from an organization Important Employee 1ehaviors .rganizational 2itizenship 1ehavior -.210 Discretionary behavior that is not a part of an employees formal /ob re*!irements, b!t which promotes the effective f!nctioning of the organization. Gob 'atisfaction )he individ!als general attit!de toward his or her /ob $sychological #actors Affecting Employee 1ehavior Attit!des Employee

Stimulating -nno!ation 2reativity )he ability to combine ideas in a !ni*!e way or to make an !n!s!al association. Innovation )!rning the o!tcomes of the creative process into !sef!l prod!cts, services, or work methods. Idea 2hampion Dynamic self confident leaders who actively and enth!siastically inspire s!pport for new ideas, b!ild s!pport, overcome resistance, and ens!re that innovations are implemented. Systems (iew of -nno!ation

-nno!ation (ariables

$rod!ctivity Absenteeism )!rnover .rganizational

$ersonality $erception 3earning

2o!ld be becoming an o!tmoded meas!re as the n!mber of workers who change employers increases. $erceived .rganizational '!pport Is the general belief of employees that their organization val!es their contrib!tion and cares abo!t their well being. %epresents the commitment of the organization to the employee. $roviding high levels of s!pport increases /ob satisfaction and lower t!rnover.

$sychological #actors Attit!des Eval!ative statementsFeither favorable or !nfavorableFconcerning ob/ects, people, or events. 2omponents .f An Attit!de )ogniti!e component; the beliefs, opinions, knowledge, or information held by a person. Affecti!e component; the emotional or feeling part of an attit!de. Beha!ioral component; the intention to behave in a certain way. Gob 'atisfaction Gob satisfaction is affected by level of income earned and by the type of /ob a worker does. Gob 'atisfaction and $rod!ctivity #or individ!als, prod!ctivity appears to lead to /ob satisfaction. #or organizations, those with more satisfied employees are more effective than those with less satisfied employees. Gob 'atisfaction and Absenteeism 'atisfied employees tend to have lower levels of absenteeism. Gob 'atisfaction and )!rnover 'atisfied employees have lower levels of t!rnover" dissatisfied employees have higher levels of t!rnover. )!rnover is affected by the level of employee performance. )he preferential treatment afforded s!perior employees makes satisfaction less important in predicting their t!rnover decisions. Gob 'atisfaction and 2!stomer 'atisfaction )he level of /ob satisfaction for frontline employees is related to increased c!stomer satisfaction and loyalty. Interaction with dissatisfied c!stomers can increase an employees /ob dissatisfaction. Actions to increase /ob satisfaction for c!stomer service workers: (ire !pbeat and friendly employees. %eward s!perior c!stomer service. $rovide a positive work climate. 4se attit!de s!rveys to track employee satisfaction.

Attit!de '!rveys Attit!de '!rveys A instr!ment9doc!ment that presents employees with a set of statements or *!estions eliciting how they feel abo!t their /obs, work gro!ps, s!pervisors, or their organization. $rovide management with feedback on employee perceptions of the organization and their /obs. Attit!des and 2onsistency $eople seek consistency in two ways: 2onsistency among their attit!des. 2onsistency between their attit!des and behaviors. If an inconsistency arises, individ!als: Alter their attit!des or Alter their behavior or Develop a rationalization for the inconsistency 2ognitive Dissonance )heory 2ognitive Dissonance Any incompatibility or inconsistency between attit!des or between behavior and attit!des. Any form of inconsistency is !ncomfortable and individ!als will try to red!ce the dissonance. )he intensity of the desire to red!ce the dissonance is infl!enced by: )he importance of the factors creating the dissonance. )he degree to which an individ!al believes that the factors ca!sing the dissonance are controllable. %ewards available to compensate for the dissonance. )he Importance of Attit!des Implication for &anagers Attit!des warn of potential behavioral problems: &anagers sho!ld do things that generate the positive attit!des that red!ce absenteeism and t!rnover. Attit!des infl!ence behaviors of employees:

.rganizational 2ommitment Is the degree to which an employee identifies with a partic!lar organization and its goals and wishes to maintain membership in the organization. 3eads to lower levels of both absenteeism and t!rnover.

 &anagers sho!ld foc!s on helping employees become more prod!ctive to increase /ob satisfaction. Employees will try to red!ce dissonance !nless: &anagers identify the e+ternal so!rces of dissonance. &anagers provide rewards compensating for the dissonance. $ersonality $ersonality )he !ni*!e combination of psychological characteristics -meas!rable traits0 that affect how a person reacts and interacts with others. 2lassifying $ersonality )raits &yers 1riggs )ype Indicator -&1)I0 A general personality assessment tool that meas!res the personality of an individ!al !sing fo!r categories: 'ocial interaction: E+trovert or Introvert -E or I0 $reference for gathering data: 'ensing or Int!itive -' or :0 $reference for decision making: #eeling or )hinking -# or )0 'tyle of decision making: $erceptive or G!dgmental -$ or G0 )he 1ig #ive &odel E/tra!ersion SociableC tal'ati!eC and asserti!e Agreeableness Good8naturedC cooperati!eC and trusting )onscientiousness ResponsibleC dependableC persistentC and achie!ement oriented Emotional Stability )almC enthusiasticC and secure or tenseC ner!ousC and insecure Openness to E/perience -maginati!eC artistically sensiti!eC and intellectual .ther $ersonality Insights 3oc!s of 2ontrol E/ternal locus; persons who believe that what happens to them is d!e to l!ck or chance -the !ncontrollable effects of o!tside forces0 . -nternal locus; persons who believe that they control their own destiny. &achiavellianism -&ach0 )he degree to which an individ!al is pragmatic, maintains emotional distance, and seeks to gain and manip!late powerF6the ends /!stify the means6.

'elf Esteem -'E0 )he degree to which people like or dislike themselves (igh 'Es 1elieve in themselves and e+pect s!ccess. )ake more risks and !se !nconventional approaches. Are more satisfied with their /obs than 3ow 'Es. 3ow 'Es Are more s!sceptible to e+ternal infl!ences. Depend on positive eval!ations from others. Are more prone to conform than high 'Es. 'elf &onitoring An individ!als ability to ad/!st his or her behavior to e+ternal, sit!ational factors. (igh self monitors: Are sensitive to e+ternal c!es and behave differently in different sit!ations. 2an present contradictory p!blic persona and private selves. 3ow self monitors Do not ad/!st their behavior to the sit!ation. Are behaviorally consistent in p!blic and private. %isk )aking )he propensity -willingness0 to take risks. (igh risk takers take less time and re*!ire less information than low risk takers when making a decision. .rganizational effectiveness is ma+imized when the risk taking propensity of a manager is aligned with the specific demands of the /ob assigned to the manager. Emotions and Intelligence Emotions Intense feelings -reactions0 that are directed at specific ob/ects -someone or something0 4niversal emotions: Anger #ear 'adness (appiness Disg!st '!rprise Emotions and Intelligence Emotional Intelligence -EI0 An assortment of noncognitive skills, capabilities, and competencies that infl!ence a persons ability to s!cceed in coping with environmental demands and press!res.

Dimensions of EI: 'elf awareness: knowing what yo!re feeling 'elf management: managing emotions and imp!lses 'elf motivation: persisting despite setbacks and fail!res Empathy: sensing how others are feeling 'ocial skills: handling the emotions of others

)he tendency of individ!als to attrib!te their s!ccesses to internal factors while blaming personal fail!res on e+ternal factors. 'hortc!ts 4sed in G!dging .thers Ass!med 'imilarity Ass!ming that others are more like !s than they act!ally are. 'tereotyping G!dging someone on the basis of o!r perception of a gro!p he or she is a part of. (alo Effect #orming a general impression of a person on the basis of a single characteristic of that person 3earning 3earning Any relatively permanent change in behavior that occ!rs as a res!lt of e+perience. Almost all comple+ behavior is learned. 3earning is a contin!o!s, life long process. )he principles of learning can be !sed to shape behavior )heories of learning: .perant conditioning 'ocial learning .perant 2onditioning -1.#. 'kinner0 )he theory that behavior is a f!nction of its conse*!ences and is learned thro!gh e+perience. .perant behavior: vol!ntary or learned behaviors 1ehaviors are learned by making rewards contingent to behaviors. 1ehavior that is rewarded -positively reinforced0 is likely to be repeated. 1ehavior that is p!nished or ignored is less likely to be repeated. 'ocial 3earning )he theory that individ!als learn thro!gh their observations of others and thro!gh their direct e+periences. Attrib!tes of models that infl!ence learning: Attentional: the attractiveness or similarity of the model %etention: how well the model can be recalled &otor reprod!ction: the reprod!cibility of the models actions %einforcement: the rewards associated with learning the model behavior 'haping 1ehavior Attempting to 5mold6 individ!als by g!iding their learning in grad!ated steps s!ch that they learn to behave in ways that most benefit the organization.

4nderstanding $ersonality Differences $ersonality Gob #it )heory -(olland0 An employees /ob satisfaction and likelihood of t!rnover depends on the compatibility of the employees personality and occ!pation. 8ey points of the theory: )here are differences in personalities. )here are different types of /obs. Gob satisfaction and t!rnover are related to the match between personality and /ob for an individ!al. $erception $erception A process by which individ!als give meaning -reality0 to their environment by organizing and interpreting their sensory impressions. #actors infl!encing perception: )he perceivers personal characteristicsF interests, biases and e+pectations )he targets characteristicsF distinctiveness, contrast, and similarity0 )he sit!ation -conte+t0 factorsFplace, time, locationFdraw attention or distract from the target (ow ;e $erceive $eople Attrib!tion )heory (ow the actions of individ!als are perceived by others depends on what meaning -ca!sation0 we attrib!te to a given behavior. Internally ca!sed behavior: !nder the individ!als control E+ternally ca!sed behavior: d!e to o!tside factors Determining the so!rce of behaviors: Distinctiveness: different behaviors in different sit!ations 2onsens!s: behaviors similar to others in same sit!ation 2onsistency: reg!larity of the same behavior #!ndamental attrib!tion error )he tendency to !nderestimate the infl!ence of e+ternal factors and to overestimate the infl!ence of internal or personal factors. 'elf serving bias

 'haping methods: $ositive reinforcement: rewarding desired behaviors :egative reinforcement $!nishment E+tinction 'haping 1ehavior Attempting to 5mold6 individ!als by g!iding their learning in grad!ated steps s!ch that they learn to behave in ways that most benefit the organization. 'haping methods: $ositive reinforcement: rewarding desired behaviors. :egative reinforcement: removing an !npleasant conse*!ence once the desired behavior is e+hibited. $!nishment: penalizing an !ndesired behavior. E+tinction: eliminating reinforcement for an !ndesired behavior. 'nderstanding )roups and Teamwor* <nderstanding Groups ,ro!p )wo or more interacting and interdependent individ!als who come together to achieve specific goals. #ormal gro!ps ;ork gro!ps defined by the organizations str!ct!re that have designated work assignments and tasks. Appropriate behaviors are defined by and directed toward organizational goals. Informal gro!ps ,ro!ps that are independently formed to meet the social needs of their members. E/amples of &ormal Groups 2ommand ,ro!ps ,ro!ps that are determined by the organization chart and composed of individ!als who report directly to a given manager. )ask ,ro!ps ,ro!ps composed of individ!als bro!ght together to complete a specific /ob task" their e+istence is often temporary beca!se once the task is completed, the gro!p disbands. 2ross #!nctional )eams ,ro!ps that bring together the knowledge and skills of individ!als from vario!s work areas or gro!ps whose members have been trained to do each others /obs. 'elf &anaged )eams

,ro!ps that are essentially independent and in addition to their own tasks, take on traditional responsibilities s!ch as hiring, planning and sched!ling, and performance eval!ations.

Stages in Group 2e!elopment #orming &embers /oin and begin the process of defining the gro!ps p!rpose, str!ct!re, and leadership. 'torming Intragro!p conflict occ!rs as individ!als resist control by the gro!p and disagree over leadership. :orming 2lose relationships develop as the gro!p becomes cohesive and establishes its norms for acceptable behavior. $erforming A f!lly f!nctional gro!p str!ct!re allows the gro!p to foc!s on performing the task at hand. Ad/o!rning )he gro!p prepares to disband and is no longer concerned with high levels of performance. Stages of Group 2e!elopment

Group Beha!ior Model

,or' Group Beha!ior Internal ?ariables Affecting ,ro!p 1ehavior )he individ!al abilities of the gro!ps members )he size of the gro!p )he level of conflict )he internal press!res on members to conform to the gro!ps norms

)onditions Affecting Group Beha!ior E+ternal -.rganizational0 2onditions .verall strategy A!thority str!ct!res #ormal reg!lations Available organizational reso!rces Employee selection criteria $erformance management -appraisal0 system .rganizational c!lt!re ,eneral physical layo!t Internal ,ro!p ?ariables Individ!al competencies and traits of members ,ro!p str!ct!re 'ize of the gro!p 2ohesiveness and the level of intragro!p conflict Internal press!res on members to conform o the gro!ps norms Group Structure %ole )he set of e+pected behavior patterns attrib!ted to someone who occ!pies a given position in a social !nit that assist the gro!p in task accomplishment or maintaining gro!p member satisfaction. %ole conflict: e+periencing differing role e+pectations %ole ambig!ity: !ncertainty abo!t role e+pectations :orms Acceptable standards or e+pectations that are shared by the gro!ps members. 2ommon types of norms Effort and performance .!tp!t levels, absenteeism, promptness, socializing Dress 3oyalty 2onformity Individ!als conform in order to be accepted by gro!ps. ,ro!p press!res can have an effect on an individ!al members /!dgment and attit!des. )he effect of conformity is not as strong as it once was, altho!gh still a powerf!l force. Groupthin' )he e+tensive press!re of others in a strongly cohesive or threatened gro!p that ca!ses individ!al members to change their opinions to conform to that of the gro!p. 'tat!s 'ystem )he formal or informal prestige grading, position, or ranking system for members of a gro!p that serves as

recognition for individ!al contrib!tions to the gro!p and as a behavioral motivator. #ormal stat!s systems are effective when the perceived ranking of an individ!al and the stat!s symbols accorded that individ!al are congr!ent. Group Structure; Group Si%e 'mall gro!ps 2omplete tasks faster than larger gro!ps. &ake more effective !se of facts. 3arge gro!ps 'olve problems better than small gro!ps. Are good for getting diverse inp!t. Are more effective in fact finding. 'ocial 3oafing )he tendency for individ!als to e+pend less effort when working collectively than when work individ!ally. ,ro!p 2ohesiveness )he degree to which members are attracted to a gro!p and share the gro!ps goals. (ighly cohesive gro!ps are more effective and prod!ctive than less cohesive gro!ps when their goals aligned with organizational goals. The Relationship Between )ohesi!eness and Producti!ity

Group Processes; Group 2ecision Ma'ing Advantages ,enerates more complete information and knowledge. ,enerates more diverse alternatives. Increases acceptance of a sol!tion. Increases legitimacy of decision. Disadvantages )ime cons!ming &inority domination $ress!res to conform Ambig!o!s responsibility Group !ersus -ndi!idual 2ecision Ma'ing

2ontrolled conflict: &ore interaction among gro!p members.

Techni:ues for Ma'ing More )reati!e Group 2ecisions

,hat -s a Team. ;ork )eam A gro!p whose members work intensely on a specific common goal !sing their positive synergy, individ!al and m!t!al acco!ntability, and complementary skills. )ypes of )eams $roblem solving teams 'elf managed work teams 2ross f!nctional teams ?irt!al teams Groups !ersus Teams

Group Processes; )onflict Management 2onflict )he perceived incompatible differences in a gro!p res!lting in some form of interference with or opposition to its assigned tasks. Traditional !iew; conflict m!st be avoided. $uman relations !iew; conflict is a nat!ral and inevitable o!tcome in any gro!p. -nteractionist !iew; conflict can be a positive force and is absol!tely necessary for effective gro!p performance. 2ategories of 2onflict #!nctional conflicts are constr!ctive. Dysf!nctional conflicts are destr!ctive. )ypes of 2onflict )ask conflict: content and goals of the work %elationship conflict: interpersonal relationships $rocess conflict: how the work gets done )echni*!es to %ed!ce 2onflict: Avoidance Accommodation #orcing 2ompromise 2ollaboration Group Tas's and Group Effecti!eness (ighly comple+ and interdependent tasks re*!ire: Effective comm!nications: disc!ssion among gro!p members.

Types of Teams $roblem solving )eams Employees from the same department and f!nctional area who are involved in efforts to improve work activities or to solve specific problems. 'elf managed ;ork )eams A formal gro!p of employees who operate witho!t a manager and responsible for a complete work process or segment. 2ross f!nctional )eams A hybrid gro!ping of individ!als who are e+perts in vario!s specialties and who work together on vario!s tasks. ?irt!al )eams )eams that !se comp!ter technology to link physically dispersed members in order to achieve a common goal. Ad!antages of <sing Teams )eams o!tperform individ!als. )eams provide a way to better !se employee talents. )eams are more fle+ible and responsive. )eams can be *!ickly assembled, deployed, refoc!sed, and disbanded. )haracteristics of Effecti!e Teams (ave a clear !nderstanding of their goals. (ave competent members with relevant technical and interpersonal skills. E+hibit high m!t!al tr!st in the character and integrity of their members. Are !nified in their commitment to team goals. (ave good comm!nication systems. $ossess effective negotiating skills

(ave appropriate leadership (ave both internally and e+ternally s!pportive environments )urrent )hallenges in Managing Teams ,etting employees to: 2ooperate with others 'hare information 2onfront differences '!blimate personal interest for the greater good of the team Managing Global Teams ,ro!p &ember %eso!rces 4ni*!e c!lt!ral characteristics of team members Avoiding stereotyping ,ro!p 'tr!ct!re 2onformityFless gro!pthink 'tat!sFvaries in importance among c!lt!res 'ocial loafingFpredominately a ;estern bias 2ohesivenessFmore diffic!lt to achieve ,ro!p processesFcapitalize on diverse ideas &anagers roleFa comm!nicator sensitive to the type of globe team to !se. <nderstanding Social 9etwor's 'ocial :etwork )he patterns of informal connections among individ!als within gro!ps )he Importance of 'ocial :etworks %elationships can help or hinder team effectiveness %elationships improve team goal attainment and increase member commitment to the team. +eadership +eaders and +eadership 3eader 7 'omeone who can infl!ence others and who has managerial a!thority 3eadership 7 ;hat leaders do" the process of infl!encing a gro!p to achieve goals Ideally, all managers should be leaders Altho!gh gro!ps may have informal leaders who emerge, those are not the leaders were st!dying 5eadership research has tried to ans er6 ,hat is an effective leaderEarly +eadership Theories )rait )heories -@MCKs DKs0 %esearch foc!sed on identifying personal characteristics that differentiated leaders from nonleaders was !ns!ccessf!l. 3ater research on the leadership process identified seven traits associated with s!ccessf!l leadership: Drive, the desire to lead, honesty and integrity, self confidence, intelligence, /ob relevant knowledge, and e+traversion. 1ehavioral )heories

4niversity of Iowa 't!dies -8!rt 3ewin0 Identified three leadership styles: Autocratic style; centralized a!thority, low participation 2emocratic style; involvement, high participation, feedback +aisse% faire style; hands off management %esearch findings: mi+ed res!lts :o specific style was consistently better for prod!cing better performance Employees were more satisfied !nder a democratic leader than an a!tocratic leader. .hio 'tate 't!dies Identified two dimensions of leader behavior -nitiating structure; the role of the leader in defining his or her role and the roles of gro!p members )onsideration; the leaders m!t!al tr!st and respect for gro!p members ideas and feelings. %esearch findings: mi+ed res!lts (igh high leaders generally, b!t not always, achieved high gro!p task performance and satisfaction. Evidence indicated that sit!ational factors appeared to strongly infl!ence leadership effectiveness. 4niversity of &ichigan 't!dies Identified two dimensions of leader behavior Employee oriented; emphasizing personal relationships Production oriented; emphasizing task accomplishment %esearch findings: 3eaders who are employee oriented are strongly associated with high gro!p prod!ctivity and high /ob satisfaction. The Managerial Grid &anagerial ,rid Appraises leadership styles !sing two dimensions: 2oncern for people 2oncern for prod!ction $laces managerial styles in five categories: Impoverished management )ask management &iddle of the road management 2o!ntry cl!b management )eam management )ontingency Theories of +eadership )he #iedler &odel $roposes that effective gro!p performance depends !pon the proper match between the leaders style of interacting with followers and the degree

to which the sit!ation allows the leader to control and infl!ence. Ass!mptions: A certain leadership style sho!ld be most effective in different types of sit!ations. 3eaders do not readily change leadership styles. &atching the leader to the sit!ation or changing the sit!ation to make it favorable to the leader is re*!ired. 3east preferred co worker -3$20 *!estionnaire Determines leadership style by meas!ring responses to @P pairs of contrasting ad/ectives. (igh score: a relationship oriented leadership style 3ow score: a task oriented leadership style 'it!ational factors in matching leader to the sit!ation: 3eader member relations )ask str!ct!re $osition power (ersey and 1lanchards 'it!ational 3eadership )heory -'3)0 Arg!es that s!ccessf!l leadership is achieved by selecting the right leadership style which is contingent on the level of the followers readiness. Acceptance; leadership effectiveness depends on whether followers accept or re/ect a leader. Readiness; the e+tent to which followers have the ability and willingness to accomplish a specific task. 3eaders m!st relin*!ish control over and contact with followers as they become more competent. 2reates fo!r specific leadership styles incorporating #iedlers two leadership dimensions: Telling; high task low relationship leadership Selling; high task high relationship leadership Participating; low task high relationship leadership 2elegating; low task low relationship leadership $osits fo!r stages follower readiness: R0; followers are !nable and !nwilling R3; followers are !nable b!t willing R4; followers are able b!t !nwilling R5; followers are able and willing 3eader $articipation &odel -?room and Letton0 $osits that leader behavior m!st be ad/!sted to reflect the task str!ct!reF whether it is ro!tine, nonro!tine, or in

betweenFbased on a se*!ential set of r!les -contingencies0 for determining the form and amo!nt of follower participation in decision making in a given sit!ation. 3eader $articipation &odel 2ontingencies: Decision significance Importance of commitment 3eader e+pertise 3ikelihood of commitment ,ro!p s!pport ,ro!p e+pertise )eam competence

+eadership Styles in the (room +eader Participation Model #ecide. 3eader makes the decision alone and either anno!nces or sells it to gro!p. %onsult &ndividually. 3eader presents the problem to gro!p members individ!ally, gets their s!ggestions, and then makes the decision. %onsult )roup. 3eader presents the problem to gro!p members in a meeting, gets their s!ggestions, and then makes the decision. Facilitate. 3eader presents the problem to the gro!p in a meeting and, acting as facilitator, defines the problem and the bo!ndaries within which a decision m!st be made. #elegate. 3eader permits the gro!p to make the decision within prescribed limits. $ath ,oal &odel 'tates that the leaders /ob is to assist his or her followers in attaining their goals and to provide direction or s!pport to ens!re their goals are compatible with organizational goals. 3eaders ass!me different leadership styles at different times depending on the sit!ation: Directive leader '!pportive leader $articipative leader Achievement oriented leader Path8Goal Theory

)ontemporary (iews on +eadership

 )ransactional 3eadership 3eaders who g!ide or motivate their followers in the direction of established goals by clarifying role and task re*!irements. )ransformational 3eadership 3eaders who inspire followers to transcend their own self interests for the good of the organization by clarifying role and task re*!irements. 3eaders who also are capable of having a profo!nd and e+traordinary effect on their followers. 2harismatic 3eadership An enth!siastic, self confident leader whose personality and actions infl!ence people to behave in certain ways. 2haracteristics of charismatic leaders: (ave a vision. Are able to artic!late the vision. Are willing to take risks to achieve the vision. Are sensitive to the environment and follower needs. E+hibit behaviors that are o!t of the ordinary. ?isionary 3eadership A leader who creates and artic!lates a realistic, credible, and attractive vision of the f!t!re that improves !pon the present sit!ation. ?isionary leaders have the ability to: E+plain the vision to others. E+press the vision not /!st verbally b!t thro!gh behavior. E+tend or apply the vision to different leadership conte+ts. )eam 3eadership 2haracteristics (aving patience to share information 1eing able to tr!st others and to give !p a!thority 4nderstanding when to intervene )eam 3eaders Gob &anaging the teams e+ternal bo!ndary #acilitating the team process 2oaching, facilitating, handling disciplinary problems, reviewing team and individ!al performance, training, and comm!nication Specific Team +eadership Roles

)he power a leader has as a res!lt of his or her position. 2oercive power )he power a leader has to p!nish or control. %eward power )he power to give positive benefits or rewards. E+pert power )he infl!ence a leader can e+ert as a res!lt of his or her e+pertise, skills, or knowledge. %eferent power )he power of a leader that arises beca!se of a persons desirable reso!rces or admired personal traits. Q2e!eloping )redibility and Trust 2redibility -of a 3eader0 )he assessment of a leaders honesty, competence, and ability to inspire by his or her followers )r!st Is the belief of followers and others in the integrity, character, and ability of a leader. 2imensions of trust; integrity, competence, consistency, loyalty, and openness. Is related to increases in /ob performance, organizational citizenship behaviors, /ob satisfaction, and organization commitment. Pro!iding Ethical +eadership Ethics are part of leadership when leaders attempt to: #oster moral virt!e thro!gh changes in attit!des and behaviors. 4se their charisma in socially constr!ctive ways. $romote ethical behavior by e+hibiting their personal traits of honesty and integrity. &oral 3eadership Involves addressing the means that a leader !ses to achieve goals as well as the moral content of those goals. Empowering Employees Empowerment Involves increasing the decision making discretion of workers s!ch that teams can make key operating decisions in develop b!dgets, sched!ling workloads, controlling inventories, and solving *!ality problems. ;hy empower employeesO A!icker responses problems and faster decisions. Addresses the problem of increased spans of control in relieving managers to work on other problems. )ross8)ultural +eadership 4niversal Elements of Effective 3eadership

+eadership -ssues in the 30st )entury &anaging $ower 3egitimate power

?ision #oresight $roviding enco!ragement )r!stworthiness Dynamism $ositiveness $roactiveness

&)'r &'ncti)ns ), 1)""'nicati)n

1)ntr)l

%)tivati)n

Gender 2ifferences and +eadership %esearch #indings &ales and females !se different styles: ;omen tend to adopt a more democratic or participative style !nless in a male dominated /ob. ;omen tend to !se transformational leadership. &en tend to !se transactional leadership. Basics of +eadership ,ive people a reason to come to work. 1e loyal to the organizations people 'pend time with people who do the real work of the organization. 1e more open and more candid abo!t what b!siness practices are acceptable and proper and how the !nacceptable ones sho!ld be fi+ed. +eadership )an Be -rrele!antD '!bstit!tes for 3eadership #ollower characteristics E+perience, training, professional orientation, or the need for independence Gob characteristics %o!tine, !nambig!o!s, and satisfying /obs .rganization characteristics E+plicit formalized goals, rigid r!les and proced!res, or cohesive work gro!ps %ommunication and &nterpersonal S*ills ,hat -s )ommunication. 2omm!nication )he transfer and !nderstanding of meaning. )ransfer means the message was received in a form that can be interpreted by the receiver. 4nderstanding the message is not the same as the receiver agreeing with the message. Interpersonal 2omm!nication 2omm!nication between two or more people .rganizational 2omm!nication All the patterns, network, and systems of comm!nications within an organization &our &unctions of )ommunication

&'ncti)ns ), 1)""'nicati)n

In,)r"ati)n

E")ti)nal Ex ressi)n

2007 Prentice Hall, Inc. All rights reserved.

110

&unctions of )ommunication 2ontrol #ormal and informal comm!nications act to control individ!als behaviors in organizations. &otivation 2omm!nications clarify for employees what is to done, how well they have done it, and what can be done to improve performance. Emotional E+pression 'ocial interaction in the form of work gro!p comm!nications provides a way for employees to e+press themselves. Information Individ!als and work gro!ps need information to make decisions or to do their work.

-nterpersonal )ommunication &essage 'o!rce: senders intended meaning Encoding )he message converted to symbolic form 2hannel )he medi!m thro!gh which the message travels Decoding )he receivers retranslation of the message :oise Dist!rbances that interfere with comm!nications The -nterpersonal )ommunication Process

2istortions in )ommunications &essage Encoding )he effect of the skills, attit!des, and knowledge of the sender on the process of encoding the message

)he social c!lt!ral system of the sender )he &essage 'ymbols !sed to convey the messages meaning )he content of the message itself )he choice of message format :oise interfering with the message )he 2hannel )he senders choice of the appropriate channel or m!ltiple channels for conveying the message %eceiver )he effect of skills, attit!des, and knowledge of the receiver on the process of decoding the message )he social c!lt!ral system of the receiver #eedback 3oop 2omm!nication channel distortions affecting the ret!rn message from receiver to sender -nterpersonal )ommunication Methods #ace to face )elephone ,ro!p meetings #ormal presentations &emos )raditional &ail #a+ machines Employee p!blications 1!lletin boards A!dio and videotapes (otlines E mail 2omp!ter conferencing ?oice mail )eleconferences ?ideoconferences E!aluating )ommunication Methods #eedback 2omple+ity capacity 1readth potential 2onfidentiality Encoding ease Decoding ease #eedback 2omple+ity capacity 1readth potential 2onfidentiality Encoding ease Decoding ease :onverbal 2omm!nication 2omm!nication that is transmitted witho!t words. 'o!nds with specific meanings or warnings Images that control or enco!rage behaviors 'it!ational behaviors that convey meanings 2lothing and physical s!rro!ndings that imply stat!s

1ody lang!age: gest!res, facial e+pressions, and other body movements that convey meaning. ?erbal intonation: emphasis that a speaker gives to certain words or phrases that conveys meaning.

Inter ers)nal 1)""'nicati)n !arriers

&iltering E")ti)ns

*ati)nal 1'lt're

3ang'age

Inter ers)nal 1)""'nicati)n

In,)r"ati)n 2verl)ad

-e,ensiveness

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Barriers to Effecti!e -nterpersonal )ommunication #iltering )he deliberate manip!lation of information to make it appear more favorable to the receiver. Emotions Disregarding rational and ob/ective thinking processes and s!bstit!ting emotional /!dgments when interpreting messages. Information .verload 1eing confronted with a *!antity of information that e+ceeds an individ!als capacity to process it. Defensiveness ;hen threatened, reacting in a way that red!ces the ability to achieve m!t!al !nderstanding. 3ang!age )he different meanings of and specialized ways -/argon0 in which senders !se words can ca!se receivers to misinterpret their messages. :ational 2!lt!re 2!lt!re infl!ences the form, formality, openness, patterns and !se of information in comm!nications. O!ercoming the Barriers to Effecti!e -nterpersonal )ommunications 4se #eedback 'implify 3ang!age 3isten Actively 2onstrain Emotions ;atch :onverbal 2!es Acti!e +istening Beha!iors

Types of Organi%ational )ommunication #ormal 2omm!nication 2omm!nication that follows the official chain of command or is part of the comm!nication re*!ired to do ones /ob. Informal 2omm!nication 2omm!nication that is not defined by the organizations hierarchy. $ermits employees to satisfy their need for social interaction. 2an improve an organizations performance by creating faster and more effective channels of comm!nication. 2irection of )ommunication &low Downward 2omm!nications that flow from managers to employees to inform, direct, coordinate, and eval!ate employees. 4pward 2omm!nications that flow from employees !p to managers to keep them aware of employee needs and how things can be improved to create a climate of tr!st and respect. 3ateral -(orizontal0 2omm!nication 2omm!nication that takes place among employees on the same level in the organization to save time and facilitate coordination. Diagonal 2omm!nication 2omm!nication that c!ts across both work areas and organizational levels in the interest of efficiency and speed. Types of )ommunication 9etwor's 2hain :etwork 2omm!nication flows according to the formal chain of command, both !pward and downward. ;heel :etwork All comm!nication flows in and o!t thro!gh the gro!p leader -h!b0 to others in the gro!p. All 2hannel :etwork 2omm!nications flow freely among all members of the work team. The Grape!ine An informal organizational comm!nication network that is active in almost every organization.

$rovides a channel for iss!es not s!itable for formal comm!nication channels. )he impact of information passed along the grapevine can be co!ntered by open and honest comm!nication with employees. <nderstanding -nformation Technology 1enefits of Information )echnology -I)0 Increased ability to monitor individ!al and team performance 1etter decision making based on more complete information &ore collaboration and sharing of information ,reater accessibility to coworkers :etworked 2omp!ter 'ystems 3inking individ!al comp!ters to create an organizational network for comm!nication and information sharing. )ypes of :etwork 'ystems Intranet An internal network that !ses Internet technology and is accessible only to employees. E+tranet An internal network that !ses Internet technology and allows a!thorized !sers inside the organization to comm!nicate with certain o!tsiders s!ch as c!stomers and vendors. ;ireless -;I#I0 capabilities $ow -T Affects Organi%ation %emoves the constraints of time and distance Allows widely dispersed employees to work together. $rovides for the sharing of information Increases effectiveness and efficiency. Integrates decision making and work $rovides more complete information and participation for better decisions. 2reates problems of constant accessibility to employees 1l!rs the line between work and personal lives. )urrent )ommunication -ssues &anaging 2omm!nication in an Internet ;orld 3egal and sec!rity iss!es Inappropriate !se of company e mail and instant messaging 3oss of confidential and proprietary information d!e to inadvertent or deliberate dissemination or to hackers. 3ack of personal interaction 1eing connected is not the same as face to face contact. Diffic!lties occ!r in achieving !nderstanding and collaboration in virt!al environments. )urrent )ommunication -ssues 1eing connected vers!s being concerned

&anaging Internet gripe sites as a val!able reso!rce for !ni*!e insights into the organization. Employee complaints -5hot b!tton6 iss!es0 2!stomer complaints %esponding to Internet gripe sites %ecognized them as a val!able so!rce of information. $ost messages that clarify misinformation. )ake action to correct problems noted on the site. 'et !p an internal gripe site. 2ontin!e to monitor the p!blic gripe site. &anaging the .rganizations 8nowledge %eso!rces 1!ild online information databases that employees can access. 2reate 5comm!nities of practice6 for gro!ps of people who share a concern, share e+pertise, and interact with each other. )ommunication and )ustomer Ser!ice 2omm!nicating Effectively with 2!stomers %ecognize the three components of the c!stomer service delivery process: )he c!stomer )he service organization )he service provider Develop a strong service c!lt!re foc!sed on the personalization of service to each c!stomer. 3isten and respond to the c!stomer. $rovide access to needed service information. EPolitically )orrectF )ommunication Do not !se words or phrases that stereotype, intimidate, or offend individ!als based on their differences. (owever, choose words caref!lly to maintain as m!ch clarity as possible in comm!nications. Foundations of %ontrol ,hat -s )ontrol 2ontrol )he process of monitoring activities to ens!re that they are being accomplished as planned and of correcting any significant deviations. )he $!rpose of 2ontrol )o ens!re that activities are completed in ways that lead to accomplishment of organizational goals. 2esigning )ontrol Systems &arket 2ontrol Emphasizes the !se of e+ternal market mechanisms to establish the standards !sed in the control system.

E/ternal measures; price competition and relative market share 1!rea!cratic 2ontrol Emphasizes organizational a!thority and relies on r!les, reg!lations, proced!res, and policies. 2lan 2ontrol %eg!lates behavior by shared val!es, norms, traditions, rit!als, and beliefs of the firms c!lt!re. ,hy -s )ontrol -mportant. As the final link in management f!nctions: $lanning 2ontrols let managers know whether their goals and plans are on target and what f!t!re actions to take. Empowering employees 2ontrol systems provide managers with information and feedback on employee performance. $rotecting the workplace 2ontrols enhance physical sec!rity and help minimize workplace disr!ptions. The )ontrol Process )he $rocess of 2ontrol @. &eas!ring act!al performance. C. 2omparing act!al performance against a standard. D. )aking action to correct deviations or inade*!ate standards. Measuring; $ow and ,hat ,e Measure 'o!rces of Information $ersonal observation 'tatistical reports .ral reports ;ritten reports 2ontrol 2riteria Employees 'atisfaction )!rnover Absenteeism 1!dgets 2osts .!tp!t 'ales )omparing Determining the degree of variation between act!al performance and the standard. 'ignificance of variation is determined by: )he acceptable range of variation from the standard -forecast or b!dget0. )he size -large or small0 and direction -over or !nder0 of the variation from the standard -forecast or b!dget0. Ta'ing Managerial Action 2o!rses of Action 5Doing nothing6 .nly if deviation is /!dged to be insignificant.

2orrecting act!al -c!rrent0 performance Immediate corrective action to correct the problem at once. 1asic corrective action to locate and to correct the so!rce of the deviation. 2orrective Actions 2hange strategy, str!ct!re, compensation scheme, or training programs" redesign /obs" or fire employees %evising the standard E+amining the standard to ascertain whether or not the standard is realistic, fair, and achievable. 4pholding the validity of the standard %esetting goals that were initially set too low or too high. )ontrolling for Organi%ational Performance ;hat Is $erformanceO )he end res!lt of an activity ;hat Is .rganizational $erformanceO )he acc!m!lated end res!lts of all of the organizations work processes and activities. Designing strategies, work processes, and work activities. 2oordinating the work of employees Organi%ational Performance Measures .rganizational $rod!ctivity Producti!ity; the overall o!tp!t of goods and9or services divided by the inp!ts needed to generate that o!tp!t. .!tp!t: sales reven!es Inp!ts: costs of reso!rces -materials, labor e+pense, and facilities0 4ltimately, a meas!re of how efficiently employees do their work. .rganizational Effectiveness &eas!ring how appropriate organizational goals are and how well the organization is achieving its goals. 'ystems reso!rce model )he ability of the organization to e+ploit its environment in ac*!iring scarce and val!ed reso!rces )he process model )he efficiency of an organizations transformation process in converting inp!ts to o!tp!ts )he m!ltiple constit!encies model )he effectiveness of the organization in meeting each constit!encies needs Organi%ational Effecti!eness Measures Ind!stry rankings on: $rofits %et!rn on reven!e

%et!rn on shareholders e*!ity ,rowth in profits %even!es per employee %even!es per dollar of assets %even!es per dollar of e*!ity 2orporate 2!lt!re A!dits 2ompensation and benefits s!rveys 2!stomer satisfaction s!rveys Tools for )ontrolling Organi%ational Performance #eedforward 2ontrol A control that prevents anticipated problems before act!al occ!rrences of the problem. 1!ilding in *!ality thro!gh design %e*!iring s!ppliers conform to I'. MKKC 2onc!rrent 2ontrol A control that takes place while the monitored activity is in progress. Direct s!pervision: management by walking aro!nd. #eedback 2ontrol A control that takes place after an activity is done. 2orrective action is after the fact, when the problem has already occ!rred. Advantages of feedback controls #eedback provides managers with information on the effectiveness of their planning efforts. #eedback enhances employee motivation by providing them with information on how well they are doing. Tools for )ontrolling Organi%ational Performance; &inancial )ontrols )raditional 2ontrols %atio analysis 3i*!idity 3everage Activity $rofitability 1!dget Analysis A!antitative standards Deviations .ther &eas!res Economic ?al!e Added -E?A0 &arket ?al!e Added -&?A0 .ther &eas!res Economic ?al!e Added -E?A0 (ow m!ch val!e is created by what a company does with its assets, less any capital investments in those assets: the rate of return earned over and above the cost of capital. )he choice is to !se less capital or invest in high ret!rn pro/ects. &arket ?al!e Added -&?A0 )he val!e that the stock market places on a firms past and e+pected capital investment pro/ects

 If the firms market val!e -its stock and debt0 e+ceeds the val!e of its invest capital -its e*!ity and retained earnings0, then managers have created wealth. )ontrolling Organi%ational Performance 1alanced 'corecard A meas!rement tool that !ses goals set by managers in fo!r areas to meas!re a companys performance: #inancial, c!stomer, internal processes, and people9innovation9growth assets -nformation )ontrols &anagement Information 'ystems -&I'0 A system !sed to provide management with needed information on a reg!lar basis. Data: an !norganized collection of raw, !nanalyzed facts -e.g., !nsorted list of c!stomer names0 Information: data that has been analyzed and organized s!ch that it has val!e and relevance to managers Benchmar'ing of Best Practices 1enchmarking )he search for the best practices among competitors or noncompetitors that lead to their s!perior performance. Benchmar'; the standard of e+cellence against which to meas!re and compare. A control tool for identifying and meas!ring specific performance gaps and areas for improvement. )ontemporary -ssues in )ontrol 2ross 2!lt!ral Iss!es )he !se of technology to increase direct corporate control of local operations 3egal constraints on corrective actions in foreign co!ntries Diffic!lty with the comparability of data collected from operations in different co!ntries ;orkplace 2oncerns ;orkplace privacy vers!s workplace monitoring: E mail, telephone, comp!ter, and Internet !sage $rod!ctivity, harassment, sec!rity, confidentiality, intellect!al property protection Employee theft )he !na!thorized taking of company property by employees for their personal !se. ;orkplace violence Anger, rage, and violence in the workplace is affecting employee prod!ctivity.

2!stomer Interactions 'ervice profit chain )he service se*!ence from employees to c!stomers to profit: service capability affects service val!e which impacts on c!stomer satisfaction that, in t!rn, leads to c!stomer loyalty in the form of repeat b!siness -profit0. 2orporate ,overnance )he system !sed to govern a corporation so that the interests of the corporate owners are protected. 2hanges in the role of boards of directors Increased scr!tiny of financial reporting &nformation %ontrol Systems ,hat -s Operations Management. .perations &anagement )he design, operation, and control of the transformation process that converts s!ch reso!rces as labor and raw materials into goods and services that are sold to c!stomers. )he Importance of .perations &anagement It encompasses both services and man!fact!ring. It is important in effectively and efficiently managing prod!ctivity. It plays a strategic role in an organizations competitive s!ccess. The Operations System

Manufacturing and Ser!ices &an!fact!ring .rganizations 4se operations management in the transformation process of t!rning raw materials into physical goods. 'ervice .rganizations 4se operations management in creating nonphysical o!tp!ts in the form of services -the activities of employees interacting with c!stomers0. Managing Producti!ity $rod!ctivity )he overall o!tp!t of goods or services prod!ced divided by the inp!ts needed to generate that o!tp!t. A composite of people and operations variables. 1enefits of Increased $rod!ctivity Economic growth and development

(igher wages and profits witho!t inflation Increased competitive capability d!e to lower costs 2emingGs 05 Points for -mpro!ing Producti!ity $lan for the long term f!t!re. :ever be complacent concerning the *!ality of yo!r prod!ct. Establish statistical control over yo!r prod!ction processes and re*!ire yo!r s!ppliers to do so as well. Deal with the best and fewest n!mber of s!ppliers. #ind o!t whether yo!r problems are confined to partic!lar parts of the prod!ction process or stem from the overall process itself. )rain workers for the /ob that yo! are asking them to perform. %aise the *!ality of yo!r line s!pervisors. Drive o!t fear. Enco!rage departments to work closely together rather than to concentrate on departmental or divisional distinctions. Do not adopt strictly n!merical goals. %e*!ire yo!r workers to do *!ality work. )rain yo!r employees to !nderstand statistical methods. )rain yo!r employees in new skills as the need arises. &ake top managers responsible for implementing these principles. Strategic Role of Operations Management )he era of modern man!fact!ring began in the 4.' over @KK years ago. After ;;II, 4.'. man!fact!rers foc!sed on f!nctional areas other than man!fact!ring. 1y the @MJKs, foreign competitors integrated man!fact!ring technologies were prod!cing *!ality goods at lower costs. 4.' man!fact!rers responded by investing in !pdated technology, restr!ct!ring organizations, and incl!ding prod!ction re*!irements in their strategic planning. (alue )hain Management ?al!e )he performance characteristics, feat!res and attrib!tes, and any other aspects of goods and services for which c!stomers are willing to give !p reso!rces -i.e., spend money0. )he ?al!e 2hain )he entire series of organizational work activities that add val!e at each step beginning with the processing of raw materials and ending with the finished prod!ct in the hands of end !sers. ;hat is ?al!e 2hain &anagementO

)he process of managing the entire se*!ence of integrated activities and information abo!t prod!ct flows along the entire val!e chain. ,oal of ?al!e 2hain &anagement )o create a val!e chain strategy that f!lly integrates all members into a seamless chain that meets and e+ceeds c!stomers needs and creates the highest val!e for the c!stomer. Si/ Re:uirements for Successful (alue )hain Management

%e*!irements for ?al!e 2hain &anagement A new b!siness model incorporating: 2oordination and collaboration Investment in information technology 2hanges in organizational processes 2ommitted leadership #le+ible /obs and adaptable, capable employees A s!pportive organizational c!lt!re and attit!des

!ene,its ), 5al'e 1hain %anage"ent

,mproved "roc!rement ,mproved -ogistics

!ene,its ), 5al'e 1hange %anage"ent .nhanced C!stomer /rder 0anagement ,mproved "rod!ct 1eve2opment

2007 Prentice Hall, Inc. All rights reserved.

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Obstacles to Successful (alue )hain Management

.bstacles to ?al!e 2hain &anagement

 .rganizational barriers %ef!sal or rel!ctance to share information %el!ctance to shake !p the stat!s *!o 'ec!rity iss!es 2!lt!ral attit!des 3ack of tr!st and too m!ch tr!st #ear of loss of decision making power %e*!ired capabilities 3acking or failing to develop the re*!isite val!e chain management skills $eople 3acking commitment to do whatever it takes %ef!sing to be fle+ible in meeting the demands of a changing sit!ation :ot being motivated to perform at a high level 3ack of trained managers to lead val!e chain initiatives )urrent Operations Management -ssues )echnologys %ole in &an!fact!ring Increased a!tomation and integration of prod!ction facilities with b!siness systems to control costs. $redictive maintenance, remote diagnostics, and !tility cost savings )he 2oncept of A!ality )he ability of a prod!ct or service to reliably do what its s!pposed to do and to satisfy c!stomer e+pectations. A!ality Initiatives $lanning for *!ality .rganizing and leading for *!ality 2ontrolling for *!ality A!ality ,oals I'. MKKK certification 'i+ 'igma standards Product Huality 2imensions @. $erformanceF.perating characteristics C. #eat!resFImportant special characteristics D. #le+ibilityF&eeting operating specifications over some period of time E. D!rabilityFAmo!nt of !se before performance deteriorates H. 2onformanceF&atch with preestablished standards I. 'erviceabilityFEase and speed of repair or normal service J. AestheticsF(ow a prod!ct looks and feels P. $erceived *!alityF'!b/ective assessment of characteristics -prod!ct image0 Ser!ice Huality 2imensions @. )imelinessF$erformed in promised period of time C. 2o!rtesyF$erformed cheerf!lly D. 2onsistencyF,iving all c!stomers similar e+periences each time E. 2onvenienceFAccessibility to c!stomers H. 2ompletenessF#!lly serviced, as re*!ired

I. Acc!racyF$erformed correctly each time &ass 2!stomization @. Is a design to order concept that provides cons!mers with a prod!ct when, where, and how they want it. C. &akes heavy !se of technology -fle+ible man!fact!ring techni*!es0 and engages in a contin!al dialog!e with c!stomers. 1enefits of &ass 2!stomization D. 2reates an important relationship between the firm and the c!stomer in providing loyalty b!ilding val!e to the c!stomer and in garnering val!able market information for the firm.